The Department of Labor has proposed an increase in the salary-level threshold for white-collar exemptions to $35,308 per year from $23,660. If finalized, the new overtime rule would result in the reclassification by employers of more than a million currently exempt workers as nonexempt and an increase in pay for others above the new threshold. Employers should be prepared to raise salaries to meet the minimum thresholds, pay overtime when appropriate, and otherwise adhere to the new rules if they go into effect.

Unless exempt, employees covered by the FLSA must receive overtime pay for hours worked over 40 in a workweek. To be exempt from overtime (i.e., not entitled to receive overtime), an exemption must apply. For an exemption to apply, an employee’s specific job duties and salary must meet certain minimum requirements. The “salary test” presently requires workers to make at least $23,660 on an annual basis to be exempt from overtime.

The proposed rule makes no changes to the duties test for executive, administrative, and professional employees.

Employers with salaried employees under $35,308 annually should closely monitor the development of the rule and be prepared to adjust their pay practices. If it goes into effect, the new threshold would take effect January 1, 2020.

Some may recall the DOL under the Obama Administration also proposed to raise the threshold, up to $47,476 in December of 2016 however a federal judge in Texas blocked it from taking effect. It is highly likely this new proposal will move forward with much less resistance.

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