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DOL Proposes to Change the Salary Level for Exempt Status

3.12.2019

Late last week, the United States Department of Labor (“DOL”) published proposed regulations addressing the salary level for jobs that are exempt from the minimum wage and overtime requirements of the Fair Labor Standards Act under the Administrative, Executive and Professional exemptions. The salary level has remained the same since 2004. As you may recall, under President Obama, the DOL issued regulations raising the salary level from $455 per week ($23,660 annually) to $913 per week ($47,476 annually), but those regulations were stopped by a federal injunction just weeks before their effective date. The proposed regulations issued last week set the weekly salary level at $679 per week ($35,308 annually), which is about fifty percent of the increase proposed under the Obama administration. The DOL says that the new salary level will mean that approximately one million workers will become eligible for overtime because their current salary does not meet the new threshold.

In addition to being paid the specified weekly minimum, an employee’s job functions must also satisfy a second requirement, called the “duties test.” Significantly, there are no changes to the duties test in the proposed regulations.

The proposed regulations permit employers to use non-discretionary bonuses and commissions to count towards 10% of the required salary. The proposed regulations will increase the compensation level for the “Highly Compensated Employee” exemption from its current level of $100,000 to $147,414 annually.

The proposed regulations do not provide for automatic increases in the salary requirement; instead the DOL proposes to re-evaluate the salary level every 4 years and provide notice and comment prior to raising the level.

The DOL is seeking public comment on the proposed regulations, and has indicated that it expects them to become effective in January 2020. Employers with exempt employees currently paid at less than the new salary level will want to watch these regulations carefully, and be prepared to make adjustments to stay in compliance once the new regulations become effective.

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