On March 7, 2019, the Department of Labor (“DOL”) announced a proposal to increase the salary threshold for overtime exemption. Currently, employees that earn at least $23,660 annually, or $455 per week, are exempt from overtime payments depending on their job duties. The new proposal would raise the salary threshold to $35,308 annually, or $679 per week. The new proposal is significantly lower than the $47,476 proposed by the Obama Administration that has been blocked by a permanent injunction since 2016.

The DOL’s proposal includes additional changes. Notably, it includes a commitment for periodic review of the salary threshold every four years. In addition, the proposal permits employers to use non-discretionary bonuses that are paid at least annually to satisfy up to 10 percent of the salary level. The proposal also alters the compensation level for so called “highly compensated employees” from $100,000 annually to $147,414.

The new proposal does not alter any of the job duty tests.

The proposal has yet to take effect. The DOL has submitted the proposal to the Office of the Federal Register for publication, at which point employers will have 60 days to submit comments on the proposal.

Impact on Employers

The DOL expects that the rule will take effect in January 2020. At this time, it is not clear whether the rule will be enacted as drafted, or if the DOL will amend the proposal following public comment.

Employers should take this time to review positions that they have categorized as exempt from overtime, as they may need to raise certain employees’ salaries to reach the new threshold. Employers should also review exempt employees’ job descriptions as well as actual performance to ensure that exempt employees’ satisfy the duties requirements. It is important to remember that job description alone will not qualify an employee for a salary exempt classification.

Department of Labor Proposes New Overtime Rule

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