By: Miriam L. Rosen, McDonald Hopkins PLC
DOL Discloses Proposed New FLSA Salary-Level Threshold of $35,308
After months of speculation, on March 7, 2019 the U.S. Department of Labor (DOL) announced its proposed new rule on the salary threshold for FLSA white-collar exempt status. Under the DOL’s proposal, the exempt status salary threshold will increase to $35,308 annually ($679 per week) from the current level of $23,660 per year.
Exempt Status Requirements
The Fair Labor Standards Act requires employers to pay employees at least time and one-half their regular pay rate for all hours worked over 40 in a workweek. However, the FLSA exempts certain positions from the overtime pay requirement if they satisfy two criteria or “tests”:
- The Duties Test: Employees whose primary duties involve executive, professional, and administrative functions (among others) typically meet the exempt status duties test; and
- The Salary Basis Test: Employee who are (generally) paid a guaranteed salary each week regardless of the quality or quantity (hours) of work performed and are paid at least the specified salary threshold will typically meet the exempt status salary basis test.
The FLSA regulations currently set the salary threshold of pay at $23,660 annually, which a salary of $455 per week. That salary threshold has been in place since 2004.
The 2016 Proposal to Increase Salary Threshold
As many employers will recall, in 2016 the DOL issued a new rule modifying the FLSA regulations to increase the salary threshold from $23,660 to $47,476 annually ($913 per week). That increase, which would have more than doubled the salary threshold, was met with outrage by employers who said it would harm, not help, employees as cuts to hours and even job loss would ensue. The 2016 final rule faced legal challenges by business groups and was eventually blocked by a federal judge just a week before its December 1, 2016 effective date.
The 2019 Salary Threshold Proposal and Next Steps
Although the DOL did not succeed in implementing the increased salary threshold in 2016, it has been generally recognized that, at 15 years old, the current $455 per week salary level is outdated. Secretary of Labor Alex Acosta made clear at his 2017 Senate confirmation hearing that he was looking to set a new annual salary level threshold at a mid-point between the $23,660 level and the $47,476 level set by the DOL under the Obama Administration. The DOL found that mid-point at $35,308 annually after receiving extensive public input including in-person listening sessions and more than 200,000 written comments. According to reports, the new salary threshold is expected to affect the exempt status classification of just over one million employees.
In its salary threshold proposal, the DOL also revealed that it would not seek automatic salary adjustments as included in the 2016 final rule. However, the DOL did indicate that it would seek periodic reviews to update the salary threshold every four years. An update would continue to require notice-and-comment rulemaking.
The DOL revealed the new salary threshold and other details in a Notice of Proposed Rulemaking on March 7, 2019. Once the proposed regulations are published in the Federal Register the week on March 12, 2019, the public will then have a 60 day public comment period. Barring any significant changes, the DOL would then be expected to release the final rule on the new salary threshold later this year with a likely effective date in late 2019 or early 2020.
And, like the 2016 salary threshold rule, challenges are likely. In fact, at least one worker advocacy group has already said that it will contest the proposed rule because the DOL has not adequately justified moving away from the higher 2016 salary threshold.
Apparently, the baseball saying, “it ain’t over till its over,” also applies to DOL regulations.
This article was written by Miriam L. Rosen, who is Chair of the Legal Affairs Committee of Detroit SHRM and Chair of the Labor and Employment Law Practice Group in the Bloomfield Hills office of McDonald Hopkins PLC, a full service law firm. She can be reached at firstname.lastname@example.org or at (248) 220-1342.
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