Following an earlier directive from President Obama to “modernize and streamline” those exemptions, the U.S. Department of Labor yesterday issued its proposed rule to raise the minimum salary requirements for the Fair Labor Standard Act’s “white collar” exemptions to $50,440 per year. This new threshold will more than double the current minimum salary requirement of $23,660 per year and raise the minimum salary requirement to the 40th percentile of weekly earnings for full-time salaried employees. The DOL is also proposing periodic updates in this minimum salary threshold so as to avoid the minimum becoming outdated with the passage of time.
In addition to the minimum salary requirements, the FLSA “white collar” exemptions for executive, administrative, professional, outside sales and computer employees also contain certain job duties tests. At this point, the proposed regulations do not include changes to those job duties tests. The DOL, however, continues to indicate that such changes remain a possibility.
According to the Obama Administration, this new minimum salary requirement will result in increased salaries and/or overtime compensation for some 5 million workers. In a similar vein, a study by Oxford Economics finds that the new salary threshold will cost employers in the restaurant and retail industries alone approximately $9.5 billion per year. Other industries almost certain to be affected by this new rule are the service, fast food and janitorial industries along with other similar industries where lower salaries are the norm.
Of course, this proposed rule will not become effective until the rule-making process is complete.