Employers Should Prepare for the Department of Labor’s Proposed Overtime Provisions

On March 7, 2019, the U.S. Department of Labor (DOL) released its highly-anticipated proposed rule to expand the overtime protections in the Fair Labor Standards Act (FLSA). The FLSA currently exempts from minimum wage and overtime requirements those employees who qualify under the “white collar” exemptions for executive, administrative, and professional employees. Currently, to qualify for these white-collar exemptions, the employee must earn more than $455 per week ($23,660 annually). The DOL’s proposal would increase the minimum salary threshold to $679 per week ($35,308 annually).

In addition, the DOL has proposed increasing the minimum salary of “highly compensated” employees, which allows employers to apply an easier exemption test. Currently, highly compensated employees are those paid $100,000 or more. The DOL’s new proposal would increase that threshold to $147,414.

If implemented, these new rules mean that:

  1. Employees paid a salary below $35,308 annually will not qualify as exempt and must be paid overtime for all hours worked in excess of 40 per work week;

  2. Employees paid a salary above $147,414 annually will be exempt from overtime pay as long as they meet the simplified highly compensated exemption test; and

  3. All employees paid a salary between $35,308 and $147,414 annually will be exempt from the FLSA’s minimum wage, overtime, and record-keeping requirements only if the employee also meets all of the requirements under one of the white collar exemption categories outlined by the DOL.

What This Means for Employers

The DOL anticipates that its new overtime regulations will be effective by January 2020, and that 1.1 million more workers will now be eligible for overtime pay under the proposed rules.

Employers should pay special attention to determining whether any employees will need to be reclassified. Employers should ensure that they are not treating as exempt any employees earning less than $35,308. Employers should also examine any employees earning between the old highly-compensated threshold of $100,000 and the new threshold of $147,414 to ensure that those employees are properly classified. Employers can also use this rule change as an opportunity to review all employee classifications and job descriptions to make sure they are consistent with the DOL’s exemption categories. Employers should also be mindful of how the DOL rule interacts with state law overtime rules, which vary by state.

Fortis Law Partners has expertise in helping clients navigate the complexities of the FLSA. If you have questions about the DOL’s new rule and want assistance with reviewing your workforce, please feel free to contact us.