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The Department of Labor’s (DOL) new proposed overtime rule was recently released. The proposal, anticipated to take effect in January of 2020, aims to increase the minimum salary that an employee must earn to be exempt from minimum wage and overtime under a white-collar exemption.
The Rule
The proposed rule requires that salaried exempt executive, professional, administrative, and computer employees must be paid at least $679 per week on a salary basis, an increase from the current minimum of $455 per week. The rule allows for non-discretionary bonuses and incentive payments to account for up to 10% of the minimum, so long as they are paid out on at least an annual basis; currently, commissions and bonuses cannot be counted toward the minimum.
The Department of Labor also proposes that highly compensated employees must be paid at least $147,414 per year to qualify as exempt. Of that amount, at least $679 per week must be paid on a salary or fee basis.
The DOL intends to update these minimums every four years based on increases to the Consumer Price Index. These increases will not be automatic, but will likely be done through notice and comment rulemaking, just as they are doing with this proposed rule.
Duties Test
There are no proposed changes to the duties tests for the various white collar exemptions. Employers should be aware that paying someone a minimum salary does not necessarily mean they are properly classified as exempt. Each of the exemption types mentioned above has a corresponding duties test. If the duties test is not met by the employee, then they are non-exempt and entitled to minimum wage and overtime, regardless of the method or amount of pay.
State Law
California and New York (and soon Washington) already have laws in place that make the minimum salary for exempt white-collar employees higher than these proposed thresholds. As employers must follow the law that is more beneficial to employees, the new proposed federal minimums would not affect employers in these states.
Submitting Comments
Once the rule has been published to the Federal Register, the public will be able to submit comments by either of the methods below. You must include the Regulatory Information Number (RIN) so the comment can be identified as applying to this proposed rule. The RIN is 1235-AA20. The proposed rule has not been published yet, but we anticipate that may happen next week.
Electronic Comments
Submit comments through the Federal eRulemaking Portal. Follow the instructions for submitting comments.
Address written submissions to Melissa Smith, Director of the Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue, N.W., Washington, D.C. 20210.
Instructions: Submit only one copy of your comments by only one method. All submissions must include the agency name and RIN, identified above, for this rulemaking. Comments received will become a matter of public record and will be posted without change to Regulations.gov, including any personal information provided. All comments must be received by 11:59 p.m. on the date indicated for consideration in this rulemaking.
Should this proposal be accepted, GTM will provide numerous resources to help employers navigate the change, including a Decision-Making Guide, Implementation Guide, information about the duties tests, and more. Request a free quote today so you’re prepared for tomorrow.
