Highly Compensated Employees, Forms of Pay, and Implementation Time
This week, we continue our discussion of WHD’s proposed rule increasing the salary threshold for exempt status. In addition to the base salary threshold and the ability to use commissions (discussed last week), WHD proposes to raise the salary threshold required to use the streamlined exemption test for highly compensated employees.
In 2004, WHD added a specific provision that paired a streamlined duties test with a much higher salary level. The highly compensated employee (HCE) provision exempts from the FLSA’s minimum wage and overtime provisions an employee who customarily and regularly performs any one or more of the exempt duties of an executive, administrative, or professional employee AND who is paid $100,000 or more annually (including $455 per week on a salary basis).
WHD proposes a significant increase to the HCE threshold, raising it from $100,000 to $147,414. To help inform WHD’s rulemaking, we are seeking your input on some questions related to this proposal:
- What positions in your industry/location are likely to be impacted (i.e., would lose exempt status or be required to move to more than $147,414)?
- It is virtually certain that the HCE level will increase. If $147,414 is too high, is there a figure between $100,000 and $147,414 that would limit the operational impact of any change?
Historically, WHD has excluded “board, lodging, or other facilities” from the salary level. In some industries, including these forms of pay would assist in meeting either the standard or the HCE threshold. To assist in formulating our comments, we seek input on the following issues:
- Would it be helpful if room and board could be counted towards the regular salary and/or the highly compensated level? If so, for what types of positions/industries?
- In addition, would it be helpful for WHD to affirmatively state that equity compensation can be used to satisfy the regular salary and/or the highly compensated level? If so, for what types of positions/industries?
Finally, WHD will provide an as-of-yet unidentified period of time to implement the changes in the final rule. In 2004, WHD provided four months. In 2016, WHD provided slightly more than six months.
- Assuming the changes are finalized as they have been proposed, how long would you need to implement those changes?