On March 7, The U.S. Department of Labor released a long-awaited proposed rule to address the salary threshold and other requirements related to implementing the exemption from minimum wage and overtime pay requirements for executive, administrative, and professional employees. The new proposed salary threshold is $35,308. In other words, employees who earn less than $35,308 annually would be automatically eligible for time-and-a-half pay for all hours worked beyond a 40-hour work week, according to Bloomberg.
In 2004, during the George W. Bush administration was the last time the salary threshold was increased. The current threshold is $23,660, which is a far cry from the $47,476 the Obama Administration proposed. As you may recall, the Obama Administration rule was blocked by a federal judge in 2017.
The newly proposed rule raises the threshold to $35,308/year ($679/week) by reverting to the methodology used in the 2004 rule that focused on the 20th percentile of full-time wage earners in the lowest income region of the company (South), as well as the retail industry.
Additionally, it doesn’t implement automatic updates, but the proposal includes conducting regularly scheduled rulemakings to update the salary threshold consistent with the methodology used in this proposal.
The proposed rule allows employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10 percent of the standard salary level.
The proposed rule will also increase the total annual compensation requirement needed to exempt highly compensated employees (HCEs) to $147,414 annually, up from the currently enforced level of $100,000 annually.
Finally, the proposal does not include changes to the current job duties test.
The Department of Labor will accept public comments until Monday, May 6, 2019 – 60-days following the release of the proposed rule in hopes of publishing a finalized version of the rule before the 2020 election.
Dawn Bauman, CAE
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