The U.S. Department of Labor (DOL) announced Wednesday a proposed rule that would increase the minimum salary threshold for exempt employees under the Fair Labor Standard Act (FLSA).
DOL said the standard salary level for exempt employees would increase from $35,568 per year to $55,068 per year if the rule is implemented. Additionally, the total annual compensation threshold for highly compensated employees would increase from $107,432 to $143,988 per year. The proposal also includes a provision that would trigger automatic updates every three years to both the standard salary level and the highly compensated employee total annual compensation threshold based on current wage data.
Notably, the proposed rule focuses solely on updating the salary threshold for overtime exemption; the rule does not address – and presumably would not change – the existing-duties test for determining whether an employee’s primary job duties meet federal and state wage and hour law requirements to qualify for an exemption from minimum wage and overtime provisions.
The proposal has not yet been published, but assuming it will be, members of the public will be able to submit comments on the notice of proposed rulemaking within 60 days after the date of publication in the Federal Register. Employers should continue to monitor the status of the rule, as the proposed changes could disqualify a number of current exempt employees from overtime exemption.
To prepare, employers can proactively review their pay practices and gather information about their current exempt employees – creating a list of such employees with information such as position, exemption status and total annual compensation to help identify employees who might be at risk of losing the exemption if the rule were implemented.
The Labor & Employment team at Miles & Stockbridge will continue to monitor the proposal and report on any updates as they arise.
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