The United States Department of Labor (“DOL”) is expected to propose a new wage threshold for various overtime exemptions under the Fair Labor Standards Act (“FLSA”). The new proposal is expected to be released in the near future and could be released as early as this month. Many expect the DOL to raise its current minimum wage threshold to $684/week, which could impact millions of employees in the United States.
Under the FLSA, employees must receive overtime pay of at least one and a half times their “regular rate” remuneration for work exceeding forty hours per working week. However, section 13(a)(1) of the RSA provides an exemption from overtime pay for persons employed in good faith. executive, administrativeand professional employees and who receive remuneration on a “salary baseof no less than $684/week. These exemptions are commonly referred to as “white collar” or “PAE” exemptions.
The base salary threshold has been raised several times since Congress enacted the FLSA in 1938. It should be noted that in 2016, the Obama administration attempted to raise the base salary threshold from $455/ week at $921/week. Ultimately, Judge Amos Mazzant of the United States District Court for the Eastern District of Texas barred the new threshold from taking effect after determining that the more than 100% salary increase violated the law. intent of Congress by supplanting the job function test and creating “a de facto wage-only test. At the time, the DOL estimated that the $921/week threshold would render more than 4.2 million workers ineligible for a white-collar exemption and eligible for overtime pay.Before the Fifth Circuit considered Judge Mazzant’s ruling, the Trump administration overturned the rule and raised the wage threshold to the current standard of $684/week .
The amount of a pay rise the DOL will propose and whether it will seek to index the threshold to a cost-of-living measure remains unknown at this time. Many unions and other worker advocates believe the DOL should match or exceed the $921 wage level of the rule proposed in 2016, with several groups demanding the wage level be set at $1,000 a week. If such an increase is proposed, it will impact millions of workers and will almost certainly meet resistance in federal courts from private employers and business groups. Many experts expect the DOL to set the salary threshold around $800, the midpoint between the current level and the proposed level for 2016.
Regardless of the ultimate wage level increase, employers relying on white-collar exemptions should be made aware of the potential changes. Although the DOL will almost certainly give employers several months of lead time before the new threshold is implemented, understanding the potential impact of a dramatic increase now will help employers adapt in the future. Employers should carefully consider all compensation practices, overtime exemptions, and potential FLSA liability in light of these potential changes.