Proposed Changes to Minimum Salary for FLSA White Collar Exemptions Released by DOL

On Thursday, March 7, 2019, the Wage and Hour Division of the United States Department of Labor issued a Notice of Proposed Rulemaking regarding certain of the “white collar” exemptions from the overtime requirements of the Fair Labor Standards Act.  In January 2019, we noted that this would be coming.

The proposed rule would increase the minimum salary under the salary basis test from the current $455 per week  ($23,660 annualized) to $679 per week ($35,308 annualized).  The $679 is applicable to the Executive, Administrative, and Professional exemptions of the FLSA, as well as to the separate exemption for computer employees—which exemptions have come to be known as the “EAP” exemptions.  The proposed rule also would update the total annual compensation requirement for the highly compensated employee exemption (“HCE”) to $147,414 – a substantial increase from the current $100,000 – of which $679 must be paid weekly on a salary or fee basis.

The phrase “currently enforced” is used in recognition of the recent history of rules on this topic.  Specifically, on May 23, 2016, the Department of Labor issued a final rule which substantially raised the salary level.  On November 22, 2016, a federal district court in Texas enjoined the DOL from implementing and enforcing the final rule.    On August 31, 2017, that court granted summary judgement against the DOL, concluding that the entire 2016 final rule was invalid.  On October 30, 2017, the district court’s decision was appealed to the United States Court of Appeals for the Fifth Circuit.  However, the DOL asked the Fifth Circuit to hold the appeal in abeyance pending further rule-making.  On November 6, 2017, the Fifth Circuit granted the Government’s request.  In the NPRM, the Department proposes to formally rescind the litigation-beleaguered 2016 rule. 

In addition to the significant increase in the required weekly salary that must be paid for the EAP and HCE exemptions, and the total annual compensation required for the HCE exemption, the 2016 rule had a mechanism for automatically updating the salary and compensation levels every three years.  That automatic change would be jettisoned as part of the formal rescission of the 2016 rule.  The NPRM takes a different approach to future changes to the regulation. It proposes that the salary and compensation minimums would be reviewed every four years.  Any changes that might be appropriately made would, however, be made only  through notice-and-comment rulemaking. As a generalization, to be exempt from the overtime requirements of the FLSA, there are two different tests that must be met.  These are the “salary” test and the “duties” test.  Although the WHD, through a Request for Information in July 2017, sought comment on the current duties tests, the March 2019 NPRM does not propose any changes to any of them.

Once the rule is published in the Federal Register (probably within the next couple of business days), the public will have 60 days to submit comments for those comments to be considered.