United States DOL Proposes Significant Increase to the Salary Threshold
Under the federal Fair Labor Standards Act (FLSA) and state wage and hour laws employers must classify all employees as either exempt or nonexempt. This classification determines how the employee should be paid to ensure legal compliance. Exempt employees are exempt from the overtime provisions of state and federal law and are expected to devote the number of hours necessary to complete their respective tasks. The compensation of an exempt employee does not change based upon the number of hours worked. By contrast, nonexempt employees must be paid overtime if they work more than forty hours per workweek. The most common FLSA overtime exemptions – often called the “white collar” exemptions – are the executive, administrative and professional exemptions.
On August 30, 2023, the United States Department of Labor (DOL) released a Notice of Proposed Rulemaking to substantially increase the minimum salary threshold needed to qualify as exempt under these “white collar” exemptions. While the exact salary level that would be included in a final rule is not yet known, it is expected that the salary level will be at least $1,059 per week ($55,068 annualized). The DOL estimates that more than 3.4 million currently exempt employees who earn at least the current salary threshold of $684 per week ($35,568 annualized) would be impacted by the rule in its first year. The proposed rule would not make any changes to the duties tests for qualifying as an exempt executive, administrative, or professional employee.
Comments on the proposal are due 60 days after its official publication in the Federal Register. The DOL states that it will consider all comments received before publishing a final rule, and MEA will keep our members apprised of any further developments. While it is unclear at this time if the salary threshold ultimately will rise, the proposed rule represents an opportunity for employers to review compensation and employee classification.
Employers should consult with experienced human resources professionals and/or labor and employment counsel with any questions regarding employment law issues. For all MEA members, the Hotline is available to provide this assistance. For MEA Essential and Premier members, a Member Legal Services attorney is available for additional consultation.
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*This Alert is provided for general informational purposes only and does not constitute legal advice.