Labor & Employment Blog

Last week, the Department of Labor (DOL) released a proposed rule that, if adopted, will raise the salary requirements for certain exempt employees. The DOL estimates its new rule could extend overtime protections to more than three million workers.

Most employers already know the Fair Labor Standards Act (FLSA) requires covered employers to pay most employees an overtime premium for all hours worked over forty in a workweek. This general rule, however, does not apply to employees in a bona fide executive, administrative, or professional capacity, as long as the employee earns a fixed salary of at least $35,568 per year. If published today, the proposed rule would raise the salary threshold to $1,059 per week, or $55,068 annually. However, the proposed rule makes clear that the DOL intends to use the most recent data available at the time the rule is published, which will change these dollar figures. The amounts are tied to the 35th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census Region. And the DOL projects the annual salary threshold could rise to $59,285 by the fourth quarter of 2023 and $60,209 by the first quarter of 2024. Regardless of the applicable threshold, the proposed rule is designed to allow millions of workers to qualify for overtime protections under the FLSA.

The proposed rule would also raise the salary requirement for exempt highly-compensated employees. Under the proposed rule, highly-compensated employees must earn at least $143,988 in total annual compensation to remain exempt from federal overtime requirements, a significant increase from the current annual threshold of $107,432. Further, the DOL proposes to establish a mechanism for automatic updates every three years for these salary thresholds. While many employers may wonder how this new rule will affect their workforce, the rule is not currently binding on employers. There will be a sixty-day public comment period. Thereafter, if the DOL publishes a final rule, employers will have an additional sixty days before the rule goes into effect. And, as with a similar but unsuccessful effort by the DOL in 2016, the final rule likely will face judicial challenges.

The proposed rule also includes increased salary requirements, not discussed in this Client Alert, for computer employees, outside sales employees, academic administrative employees, and employees in the motion picture production industry. If you have questions about what this proposed rule could mean for you or your business, contact us.