Key Takeaways:

  • Under a new rule proposed by the U.S. Department of Labor (DOL), the salary threshold for employees to qualify for the white-collar exemptions under the Fair Labor Standards Act (the “FLSA”) would increase from $35,568 to $55,068.
  • The salary threshold for the FLSA’s highly compensated employee exemption also would increase, from $107,432 to $143,988.
  • Further, the salary thresholds for these FLSA exemptions would increase automatically every three years under the new proposal.

On August 30, 2023, the DOL announced a new proposed rule making changes to the FLSA’s so-called white-collar and highly compensated employee exemptions, increasing the salary threshold that employees must meet to qualify for these exemptions. As a result of these changes, millions of employees who are now classified as exempt would become eligible to earn overtime under the FLSA.

Currently, to fall within the white-collar exemptions (i.e., the executive, administrative and professional exemptions under the FLSA), an employee must:

  • be paid a salary (the “salary basis test”);
  • be paid at least a specified weekly salary level, which is $684 per week (the equivalent of $35,568 annually for a full-year employee) (the “salary level test”); and
  • primarily perform executive, administrative, or professional duties, as provided in the DOL’s regulations (the “duties test”).

Additionally, an employee may be exempt under the highly compensated employee exemption, which combines a much higher weekly salary level with a minimal duties test. The salary threshold for the highly compensated employee exemption currently is $107,432 annually.

The DOL’s proposed rule seeks to raise the salary threshold under the white-collar exemption to $1,059 per week, or $55,068 annually. This represents the 35th percentile of earnings for full-time salaried workers in the lowest wage Census Region. The proposal also increases the salary threshold for highly compensated employees to $143,988, representing the 85% percentile of full-time salaried employees nationally. Under the proposed rule these thresholds would update automatically every three years using then-current wage data to keep the salary thresholds for these exemptions at the same percentiles.

Once the proposed rule is officially published in the Federal Register, the public will have 60 days to submit their comments. In the meantime, employers should take note of the proposed rule and assess how the rule changes the way they compensate employees who would no longer qualify for the white collar or highly compensated employee exemptions.

The post U.S. Department of Labor’s Proposed Rule Could Make Millions of Employees Overtime-Eligible first appeared on Massachusetts Labor & Employment Law.