DOL Proposed Rule Will Extend Overtime Pay To Nearly Five Million Workers By 2016
On June 30, 2015, the Department of Labor (DOL) announced a proposed rule that would raise the minimum salary threshold required to qualify for the Fair Labor Standards Act (FLSA)’s overtime eligibility exemption from $455 a week ($23,660 a year) to an estimated $970 a week ($50,440 a year).
The Notice of Proposed Rulemaking (NPRM) was published in the Federal Register on July 6, 2015, triggering a 60-day comment period. Employers have until September 4, 2015 to review and submit comments electronically by accessing the Federal eRulemaking Portal at www.regulations.gov.
Under the FLSA’s current exemption, executive, administrative, and professional employees must meet certain job duties-related tests and earn at least $455 per week ($23,660 per year) in order to be exempt from minimum wage and overtime requirements. Certain computer professionals and outside sales employees are also excluded from these salary requirements. An employee may qualify as an exempt computer professional if paid at least $455 per week or at least $27.63 an hour, if paid on an hourly basis. There is currently no salary level test required to qualify as an exempt outside sales employee. Certain professionals, including doctors, lawyers, and teachers, are also not subject to the salary level test.
The proposal calls for raising the salary level for exempt employees, last updated in 2004, to equal the 40th percentile of weekly earnings for full-time, salaried workers, bringing it to a projected level of $970 per week, or $50,440 annually, in 2016. The proposal also calls for automatic increases in the salary threshold going forward.
With respect to the duties tests themselves, the DOL has not proposed any specific regulatory changes, but it seeks comments whether duties tests changes should be made and, if so, what those changes should involve. Currently, in the State of California, 50% of an employee’s time must be spent exclusively on work that is the employee’s primary duty in order for that employee to qualify for the exemption. The DOL seeks comments whether California’s test should be the model or whether some other threshold that is less than 50% of an employee’s time worked is a better indicator of the realities of today’s workplace.
If the new salary thresholds take effect, employers must be ready to implement the changes to overtime payments immediately. Large numbers of newly non-exempt employees and their attorneys are likely to shine a spotlight on this issue.
For more information, including links to the NPRM, DOL Fact Sheet and FAQs, you can visit the Department of Labor’s website by clicking here.
Should you have any questions regarding the matters raised in this client alert, please do not hesitate to contact your Hogan Lovells attorney.