DOL Proposed Rulemaking on Overtime Exemption Salary Thresholds
On March 7, 2019, the U.S. Department of Labor (“DOL”) released a proposed rule updating the overtime regulations under the Fair Labor Standards Act (the “FLSA”). Unless exempt, employees covered by the FLSA must receive overtime at the rate of time and a half for hours worked in excess of 40 hours a week. The proposed rule would raise the current salary level for exemption from overtime pay requirements for executive, administrative, professional and computer employees (the so-called “white-collar” exemptions), as well as for “highly compensated” employees who have a more relaxed “duties test.” According to the DOL, the proposed change will allow 1.1 million additional workers to be eligible for overtime pay.
This proposed rule would increase the annual salary threshold for overtime eligibility for “white collar exemptions” to $35,308 (or $679 per week) from the current level of $23,660 (or $455 per week). The existing salary level was set in 2004, and a prior attempt by the Obama Administration to increase the salary threshold in 2016 was struck down by a federal judge in Texas. This new proposed increase is significantly less than the increase proposed by the Obama Administration, which would have increased the salary threshold to $47,000 per year. The proposed rule would also increase the total compensation exemption level for “highly compensated employees” from the current level of $100,000 to $147,414 per year.
To be exempt from overtime pay requirements under the FLSA, employees must be paid on a salary basis at or above the salary threshold, and must meet certain requirements relating to their primary job duties. The proposed rule leaves those job duty requirements unchanged.
The proposed rule reflects a commitment to update the minimum salary threshold periodically, through notice-and-comment rulemaking, to take into account inflationary factors. This is somewhat different than under the proposed Obama Administration rule, which would have imposed automatic increases on the salary threshold based upon future inflation.
School teachers and coaches will continue to remain exempt from overtime rules regardless of their salary levels. In addition, school “academic administrative personnel,” which pertains to certificated school administrators, will be exempt from overtime if they exceed the new salary threshold of $35,308. The new salary thresholds for exemption from overtime will also apply to other school employees who qualify under the duties test for one of the “white collar” exemptions.
In short, if the proposed rule becomes a final rule, nonexempt employees earning less than $35,308 a year ($679 per week) must be paid overtime if they work more than 40 hours per week. Employees earning more than $35,308 do not need to be paid overtime if they meet the standard duties test for “white collar” exemptions. Finally, employees earning more than $147,414 who meet the more relaxed duties test for “highly compensated employees” also do not need to be paid overtime.
The Department of Labor anticipates that the earliest possible date this proposed rule would take effect is January 1, 2020. Once the proposed rule is published in the federal register, the public has 60 days to submit comments. No final rule will be issued until the comment period closes.
Please note that in addition to the federal overtime standards, Governor Wolf in 2018 proposed changes to overtime rules within Pennsylvania, which would have increased the salary threshold for “white collar exemptions” to $47,892 within 3 years of implementation. However, it is expected that Governor Wolf will re-evaluate his proposal, based upon an unfavorable response issued by Pennsylvania’s Independent Regulatory Review Commission, and also based upon the new proposed rule issued last week by the U.S. Department of Labor.
We hope you find this issue of KKAL’s Labor and Employment Law Watch helpful and informative. Please understand that the Law Watch is designed to provide information about current developments and required actions. If you have any questions regarding any labor and employment law matter, including the issues discussed in this newsletter, please do not hesitate to contact us at 717-392-1100, or email us at the following addresses:
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