For nearly six months, employment experts have awaited anticipated changes to the overtime exemptions set forth in the Fair Labor Standards Act, also known as the “wage/hour” law. Today, the U.S. Department of Labor Wage and Hour Division announced a proposed rule change for overtime exemptions that could raise the minimum salary required to qualify for “white collar” exemptions from $23,660 to $50,440 per year. The proposed rule will make more—many more—employees eligible for overtime pay. Indeed, according to the DOL, the proposed rule will extend overtime protections to nearly 5 million additional white collar workers.
The DOL has updated the FLSA regulations only twice in the last 40 years. In 2014 President Obama directed the DOL to “modernize and streamline” the overtime regulations, noting that the FLSA overtime requirements had “not kept up with our modern economy.” Indeed, the current overtime salary threshold of $23,600/year is below the federal poverty line for a family of four. Consequently, over the past year, the DOL’s Wage and Hour Division has worked to develop proposed rules to answer the President’s directive. Experts have predicted sweeping changes to the law. Instead, the proposed rule changes only the salary threshold. The proposed increase would raise the new minimum to the current 40th percentile of weekly earnings for full-time, salaried workers. We expect that other substantial changes to the exemption rules will be proposed in the near future.
Virtually all employers, large and small, will be affected by this rule change and should evaluate whether positions currently classified as exempt will still qualify and, if not, what actions to take. In addition, the proposed rule is now open for public comment. If you have questions about the proposed rule change, or are interested in providing public comment, please contact any of our Labor and Employment or Employment Litigation attorneys.