Proposed Increase in Salary Level for Exempt Employees
The U.S. Department of Labor (DOL) is once again prioritizing the increase of the salary level for determining the exemption of bona fide executive, administrative, and professional employees (plus more) from the Fair Labor Standards Act’s (FLSA’s) minimum wage and overtime requirements.
As a refresher, each exemption has both a duties test and a minimum salary amount that must be met to qualify for a position to be exempt from the FLSA’s minimum wage and overtime requirements.
Those exempt positions need to be paid on a salary basis (meaning paid a set salary regardless of hours worked or quality of work) and paid at or above a minimum set amount salary amount, which is currently $684 per week ($35,568 annually).
Previous Attempts, Current Status, and Future Speculations on Minimum Salary Increase
Back in 2016, the DOL under the Obama Administration attempted to increase the salary threshold through the rulemaking process from $23,660 ($455 per week) to $47,476 ($913 per week); however numerous lawsuits and a federal judge blocked the increase.
With the proposed salary increase change reduced to $35,568 ($684 per week), the DOL under the Trump Administration issued a final rule raising the minimum salary level, which went into effect on January 1, 2020.
The DOL has made clear through its regulatory agenda and public comments that it is looking to raise the minimum salary amount again.
Speculation is rampant that the annualized new threshold is likely to range from $47,500 to over $80,000. We believer that an amount near the lower end of that range is more likely.
Anticipated Changes and Timeline for the Proposed Salary Threshold Update
There is talk that the duties test may also be changed and updated and look more like the stricter California duties test, though many feel that this change is unlikely. The duties test was last revised and, updated in August 2004.
The anticipated 2022 salary threshold rulemaking may also include a proposal for automatic adjustments to keep up with inflation, though this was one of the elements of the 2016 rulemaking that was the target of successful litigation blocking the final rule from taking effect
The 2022 proposal to update the salary threshold was initially due to be released for public comments in April 2022. On June 21, the DOL announced via its Spring Regulatory Agenda that the proposed overtime rule is now tentatively slated for October 2022. Time will tell if the DOL’s fall 2022 timeline will occur.
In the meantime, this is a great opportunity to perform an audit on all your exempt staff positions to ensure that those positions truly meet all criteria to qualify as exempt from overtime and think about how the proposed increase might impact your budget. To assist with your review, here is a link to the DOL’s Wage & Hour Division’s website, specifically how to determine if a position qualifies to be exempt from minimum wage and overtime pay.
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The information contained in this article is not a substitute for legal advice or counsel and has been pulled from multiple sources.
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