Yesterday, March 7, 2019, the United States Department of Labor unveiled a proposal to change the FLSA as it applies to non-exempt employees eligible for overtime. The proposed change increases the required weekly salary to maintain an exempt position from the current $455 per week to $679 per week (effective January 2020). Currently, under federal law, the FLSA has a threshold of $24,000 per year for an individual to meet the salary basis test in order to qualify as an exempt employee under the FLSA (in addition to meeting the duties test for exemption). You may recall that in 2016, the Obama administration attempted to increase the salary threshold to $47,476.00. This proposal does not take as big of a jump and instead results in a federal yearly required salary (under the FLSA) of $35,300.00.
Unlike the previous proposal, the current proposal does not establish any automatic periodic increases of the salary threshold over time, but instead the proposal is asking for public comment on how the federal DOL may update the requirement each four years. The last time that the salary threshold was increased was in 2004. The new proposal, however, also does not vary the threshold level based on geographic location or industry, an issue that many groups had previously identified as creating problems in more rural areas.
The proposal also increases the Highly Compensated Executive exemption from the current $100,000 per year to $147,414 (effective January 2020). The DOL estimates that the direct cost to employers would total $464.2 million in the first year of the proposed changes and the change in the standard salary level will affect approximately 1.1 million workers in the first year.
If you currently have exempt employees who are making less than $35,300 per year, we invite you to contact a member of Verrill Dana’s Labor and Employment Practice Group to further discuss best practices as to how to prepare for this proposed change.