Today the U.S. Department of Labor (DOL) released a much-anticipated proposed rule change that would increase employer overtime obligations for an estimated 5 million employees. The proposed rule seeks to change the minimum salary threshold to $970 per week (the equivalent of $50,440 annually). Currently, to be exempt from the overtime and minimum wage requirements of the Fair Labor Standards Act (FLSA), employees classified under the so-called "white collar" exemptions must satisfy the "salary basis" test, which requires employees to be paid a salary of at least $455 per week (the equivalent of $23,660 annually). The proposed rule concerns "white collar" exemptions under the FLSA for executive, administrative, professional and computer employees. The proposed rule would also increase the threshold total yearly compensation amount for highly compensated employees from $100,000 to $122,148 per year.
The proposed rule is awaiting publication in the Federal Register. Once it is published, stakeholders will have sixty (60) days to submit comments to the DOL regarding the impact of this proposed rule.
Upon implementation of the final rule, employers will be required to either raise the salaries of its exempt employees to the new minimum threshold amount or elect to treat those employees as non-exempt and pay them overtime pay for all hours worked over forty (40) in a work week. Accordingly, employers can expect to incur increased labor costs. Employers are not required to make changes to their practices until the rule is finalized, however, employers should consider the effect this proposed rule may have to their employment practices and the bottom line.