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U.S. Labor Department Appears Ready to Propose New Salary Minimums for Exempt Employees

    Client Alerts
  • January 30, 2019

Most human resources professionals are generally familiar with the saga surrounding the U.S. Department of Labor’s attempts to increase the minimum salary for claiming overtime exempt status under the Fair Labor Standards Act. In 2016, DOL issued final rules that raised the minimum salary for the executive, administrative, and professional exemptions under Part 541 from $23,660 to $47,476, and it provided for future increases by indexing the salary for inflation.

In response, interest groups representing businesses filed suit, claiming that the new salary level was arbitrary and contrary to the FLSA’s statutory language. A federal court in Texas agreed, issuing a nationwide injunction just prior to the effective date of the new rules. Before the matter could be resolved in court, the Trump administration took office and moved to stay its appeal on the basis that it was reconsidering the salary rule.

Last week, the Office of Management and Budget confirmed that it is in the process of reviewing new proposed salary rules from DOL. The current secretary of labor admitted that the existing salary level is too low as a result of inflation in the years since it was adopted. Secretary Alexander Acosta was quoted as supporting an increase in the minimum salary to somewhere in the low $30,000s, significantly below the original DOL proposal.

The OMB report did not indicate whether the new DOL proposal would also index this salary level for inflation. An increase in the salary as indicated by DOL would impact far fewer employees than the original doubling of the requirement. Many exempt employees in this lower range work for nonprofits, which faced significant difficulties trying to adapt to the new proposed salaries.