On March 7, the Department of Labor released its Notice of Proposed Rulemaking seeking public comment on proposed changes to the minimum salary requirements in the Fair Labor Standards Act’s “white-collar” overtime exemption regulations. If that sounds familiar, the DOL went through this same process back in 2015, only to have that new rule blocked by a federal court in 2016, days before it was set to take effect.
Key provisions in the DOL’s 2019 proposed rule (and how they compare to the 2016 final rule) include the following:
- Raise the minimum salary requirement from $455 per week ($23,660 annually) to $679 per week ($35,308 annually). While this increase is significant, it is far less than that contained in the 2016 final rule, which would have more than doubled the minimum salary requirement to $913 per week ($47,476 annually).
- Raise the total annual compensation requirement for the FLSA’s highly compensated employee exemption from $100,000 to $147,414. Interestingly, this increase is actually greater than the 2016 final rule, which would have increased this annual compensation requirement only to $134,004.
- Review the minimum salary thresholds every four years, with any changes taking effect only after an opportunity for public comment. The 2016 final rule provided for automatic updates (i.e., increases) every three years, so the elimination of the automatic update language is another win for employers.
- Allow employer to use non-discretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10% of the minimum salary requirement. This language is similar to language that appeared in the 2016 final rule.
- Like the 2016 final rule, the 2019 proposed rule contains no changes to the white-collar exemptions’ duties tests or any other overtime exemptions.
The DOL estimates that the changes in the 2019 proposed rule would make more than a million currently exempt workers now eligible for overtime compensation. By comparison, the DOL previously estimated that its 2016 final rule would make 4.2 million exempt workers eligible for overtime pay. The DOL clearly is attempting to make more modest changes to the existing requirements for the white-collar exemptions.
Employers and other members of the public will be able to submit comments to the DOL regarding the proposed regulations for a 60-day period after the proposals are formally published in the Federal Register. The DOL currently anticipates that the final rule will be issued in time to take effect in January 2020.
Of course, we in Pennsylvania still are waiting for the Pennsylvania Department of Labor and Industry to issue final regulations that likely will increase the minimum salary requirements for the white-collar overtime exemptions under the Pennsylvania Minimum Wage Act.
We anticipate that the requirements established under the federal and state regulations that we except to see in 2019 will not be the same, complicating compliance efforts for Pennsylvania employers. While we do not yet know what the minimum salary requirements will be for the white-collar exemptions under both the FLSA and PMWA come 2020, employers should begin considering the impact that the proposed changes would have on the status of their exempt workforce.
We expect more news in the world of overtime exemptions in 2019. Stay tuned.