DOL issues proposed rule increasing minimum salary for exempt status



March 12, 2019

Employment Law Alert

Author(s): Seth L. Neulight, Hillary Baca, Justin A. Guilfoyle

The United States Department of Labor (“DOL”) issued a Notice of Proposed Rulemaking on March 7, 2019. The proposed rule would substantially increase the minimum annual salary applicable to the “white collar” exemptions from overtime pay under the Fair Labor Standards Act (“FLSA”). The DOL estimates that over one million additional workers across the country would be eligible for overtime pay if the proposed rule is implemented.

Under the FLSA, employees must be paid at least the federal minimum wage for every hour worked, and overtime wages equal to 1.5 times their regular rate of pay for all hours worked over forty (40) in a workweek. However, an employee is not entitled to overtime pay if he or she meets the requirements of an applicable FLSA exemption. The most common among them are the so-called “white collar” exemptions for executive, administrative and professional employees.

To satisfy one of these FLSA exemptions, an employee must perform certain specified exempt job duties, and must be paid on a “salary basis,” i.e., a fixed salary each workweek, regardless of the number of hours worked, that meets or exceeds a minimum salary level. The DOL’s current proposed rule would not impact the duties test, but would increase the FLSA’s exempt salary threshold by nearly 50 percent, from $23,660 (or $455 per week) to $35,308 (or $679 per week).

The proposed rule also seeks public comment on a DOL initiative to review the FLSA exempt salary threshold every four years. The DOL appears to be moving quickly on its proposed rule in an attempt to publish a final version by January 2020 before the presidential election.

Employers should review their employee status classifications to determine the potential impact of the minimum salary increase under this proposed rule. To the extent employers plan to reclassify certain employees from exempt to non-exempt status, the proposed rule may present a timely opportunity to do so.

Note that to the extent state or municipal laws impose stricter overtime exemption obligations than the FLSA, employers must comply with those laws in the jurisdictions where they have employees. In California, for example, the minimum salary an employee must be paid to qualify as overtime exempt, as of January 1, 2019, is $49,920 per year. In New York, the salary thresholds for the executive and administrative exemptions are also higher than under the FLSA, increase each year, and vary by location within the state: $1,125 per week (or $58,500 per year) for New York City (“NYC”) employers with 11 or more employees; $1,012.50 per week (or $52,650 per year) for NYC employers with 10 or fewer employees; $900 per week (or $46,800 per year) for employers in Nassau, Suffolk and Westchester counties; and $832 per week (or $43,264 per year) for the rest of New York state.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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