In 2016, as employers scrambled to prepare to comply with the U.S. Department of Labor’s (“DOL”) “final rule,” which more than doubled the minimum salary threshold needed to meet the “white collar” exemptions by, the U.S. Court of Appeals for the Fifth Circuit issued an injunction blocking it. Now, the DOL is expected to issue a new Notice of Proposed Rulemaking—possibly this month—increasing the salary threshold for these exemptions.
The Fair Labor Standards Act (“FLSA”) generally requires employers to pay employees at least minimum wage for all hours worked and overtime pay for all hours worked in excess of 40 per workweek. However, the FLSA provides exemptions to the minimum wage and overtime provisions, including exemptions for executive, administrative, professional employees. These are known as the “white collar” exemptions. To qualify for these exemptions, employees must meet certain job duties tests and they must also be paid on a salary basis at a rate of at least $455 per week ($23,660) annually.
The 2016 rule attempted to increase the salary threshold to $47,476 annually. That rule also provided for automatic updates to the salary threshold every three years. It is unclear what the new proposed rule might contain, but an increase to the salary threshold for the white collar exemptions is expected. Regional thresholds (i.e., multiple salary thresholds that vary by geographic region) are also a possibility, though the DOL has considered and rejected such proposals in the past.
Some commentators are predicting the salary threshold to increase to the mid-$30,000 range, but that remains to be seen. Regardless, it is unlikely that any salary threshold increases would take effect prior to 2020. In the meantime, employers should continue to regularly evaluate and re-evaluate their classification of current employees to ensure compliance with the current tests for exemptions.