DOL Proposes Increase in Salary Amounts for Overtime Exemptions

DOL  proposed increasing the minimum salary for the Fair Labor Standards Act “white collar” overtime exemption from $35,568 a year to around $59,000, which will make 3.6 million salaried employees eligible for overtime, including many microbiologists, pharmacists, and human resource specialists.

Under current law, for most employees to be exempt from the FLSA overtime requirements, they must be paid a minimum weekly salary (“salary level test”) and perform certain duties (“duties test”). For the so-called “white collar” or executive, administrative, and professional exemption, the salary test was last increased in 2019. For highly compensated employees, the salary level test is much higher, but the duties test is much simpler.

$55,068 or $59,258: What is DOL proposing? Although the proposed rule appears to set the salary threshold at $55,068, DOL also estimates the salary threshold in the final rule could be around $59,258 depending on the latest Bureau of Labor Statistics earnings data.

More class action FLSA cases for highly paid employees? Increasing the salary level test for “highly compensated employees” from $107,432 to $143,988 will make it easier for the plaintiff’s bar to challenge the exemption for many groups of executives and professionals that are currently exempt a under simpler duties test. Employers will then have to decide whether to settle the case or roll the dice in court.

Current duties test remains very vague and arcane. The duties test, last revised in 2004, continues to make exemption determinations very difficult for many employees. As the Association noted in 2017 comments to DOL, the “discretion and independent judgment” requirement has become increasingly difficult to comply with in the 21st century workplace, and it will only become more difficult as artificial intelligence is implemented.

Outlook: While some employers were bracing themselves for a much higher increase, requested by some to be as high as $80,000-$90,000, given the impact of the proposal on some industries, the final rule will likely be challenged in the courts. The Association will file comments, based on member input, with DOL ahead of the 60-day comment deadline on October 30.