On Thursday, the federal Department of Labor released long-awaited proposed regulations that would replace Obama-era increases to the salary level required for employers to claim the Part 541 Executive, Administrative, and Professional overtime exemptions, with a new $35,308 floor. The new salary level significantly increases the minimum but in an amount below that contained in the original rule.
The current minimum annual salary for exempt employees is $23,660. This amount has been in place for decades and has been effectively reduced through inflation. In 2016, DOL finalized rules that doubled this minimum to more than $47,000 and provided for regular increases thereafter based on the inflation rate. A federal judge enjoined the rule days before it took effect, and the Trump administration declared its intent to revisit the original proposal in lieu of actively pursuing an appeal.
The revised salary level is midway between the current salary minimum and the 2016 rule. It addresses concerns expressed by business groups who supported an increase in the minimum salary but not to the level originally set by DOL. Most salaried exempt workers already earn more than the proposed $35,308 threshold. Workers below this level are concentrated in the retail, hospitality, and nonprofit sectors.
In addition to the new minimum salary, DOL proposes increasing the salary level for the less onerous highly compensated employee test from $134,000 in the 2016 rule to $147,000. The current highly compensated employee floor is $100,000. Up to 10 percent of the minimum salary for all of the exemptions could come from commissions and non-discretionary bonuses paid to employees. The proposal makes no changes to the duties tests for the exemptions. Instead of indexing the salary levels for inflation, DOL proposes to revisit the levels on a scheduled four-year basis, with opportunity for notice and comment.
DOL is accepting comments on the proposal for 60 days following publication in the Federal Register. In upcoming editions, EmployNews will provide a more detailed analysis of the proposal and its impact on employers.