The US Department of Labor (DOL) has announced its proposal to amend its regulations regarding “white collar” exemptions (executive, administrative, and professional) to the Fair Labor Standards Act (FLSA) overtime requirements. The DOL estimates that this amendment would allow 1.3 million employees who are presently exempt to become entitled to overtime compensation.

Under the DOL’s current regulations, which became effective in 2004, in order for an employer to claim that its employees are overtime-exempt, the subject employees must meet the duties test and be paid a salary of at least $455 per week. Stated otherwise, an employee could be classified as exempt if he/she is paid as little as $23,660 per year. The DOL recognized, with little or no opposition, that this figure is clearly outdated and needs to be modified.

In 2016, the prior Administration proposed a raise of the minimum salary level for the exemption. However, that proposal sought an increase to $913 per week, or $47,476 per year. Shortly before the effective date, the regulation was judicially challenged and a nationwide injunction was issued by a district court in Texas. The DOL appealed that ruling, but the case was stayed pending a reconsideration by the Administration.

In 2017, the DOL sought public comments on this subject to reconsider how the regulation should be modified. The present proposal is based in part upon the comments received.

In summary, the new proposal changes the minimum salary requirement for the overtime exemption to $634 per week or $35,568 per year. As with the 2016 proposal, an employer could apply non-discretionary bonuses and incentive payments (including commissions) to meet up to 10% of the required amount.

While the proposed regulation affirms the DOL’s view that the required amount should be revised more regularly, it does not contain an automatic increase provision as was provided for in the 2016 proposal. Instead, any future changes to the stated amount must be subject to the notice and comment requirements of the Administrative Procedures Act.

Finally, as with the 2016 proposal, only the minimum salary amount has been addressed; the duties requirements of the executive, administrative, and professional exemptions remain unchanged.

While this proposed amendment is not as radical as the 2016 version, it should be anticipated that a judicial challenge will be filed before the effective date of January 1, 2020.