Lynn Jackson Alert: U.S. Department of Labor Proposes Raise to Exempt Employee Minimum Salary

On March 7, 2019, the U.S. Department of Labor (DOL) announced a Notice of Proposed Rulemaking to raise the minimum salary threshold for exempt employees to $35,308 annually ($679 per week), which is up from the 2004 standard currently in place of $23,660 annually ($455 per week). Exempt categories such as administrative, executive, professional, and outside sales and computer employees are often referred to as “white collar” exemptions. Employees in exempt categories must meet not only the minimum salary requirement, but must also be paid on a salary basis and meet the standard duties test of the applicable exemption. There have been no changes under the proposed rule to the “standard duties” test under the exemptions.

The DOL’s proposed rule will be subject to a 60-day public comment period before it eventually could make its way into a final form. It is expected that the final rule would become effective some time in early 2020.

The proposed rule raises the highly-compensated employee (HCE) exemption from $100,000 under the current rule to $147,414 per year, of which $679 must be paid weekly on a salary or fee basis. Under the proposed rule, employers would not be able to count non-discretionary bonuses in order to meet the required weekly salary requirement for HCEs.

In addition, the proposed rule would allow employers to count certain bonuses, incentive payments, and commissions paid on an annual or more frequent basis to be used to satisfy up to 10 percent (10%) of the employee’s overall salary to meet the new salary threshold of $35,308.

Employer Takeaway: While this proposed rule is not yet final, employers should begin taking steps in anticipation of the rule becoming effective at some point in the next year. For example, employers should review the salary ranges for exempt employees currently in place at their businesses, and consider adjusting salaries upwards if necessary to meet the new standard, or re-classify the worker as non-exempt and paid on an hourly basis if that becomes necessary. With careful planning, employers will be well-prepared for compliance should the change in the overtime rule become effective.