By Jerry Dancy Redmond, Esquire
In the past few weeks, employers have been subjected to a flood of articles and webinars offering “next steps” for handling the proposed salary threshold increase for exempt employees. The media buzz has created more than a little angst among compliance-minded employers. If your email box and newsfeeds are causing you anxiety, take heart. Here are the facts …
The Proposal
On August 30, 2023, the Department of Labor (DOL) issued a Notice Of Proposed Rulemaking that would raise the minimum salary floor required to qualify for the overtime exemptions for executive, administrative, and professional workers under the FLSA. The proposed rule would increase the threshold for these exemptions to $1,059 per week ($55,068 per year) from the current $684 per week ($35,568 per year). This is a proposed rule. It has NOT been enacted, and may never be enacted, into law.
The Hurdles
The proposed rule was published in the Federal Register on September 8, 2023, and is subject to a 60-day comment period that expires November 7, 2023—all governmental agencies that propose changes to an existing rule that affects the public are required to publish the proposed in the Federal Register for comments. These comments generally come from business groups, advocates, etc. Depending on the volume of comments, whether supporting or not supporting the rule, the governmental agencies may or may not enact it into law. If enacted into law, the law undoubtedly will be confronted by a barrage of legal actions, resulting in the courts staying the law (i.e., not allowing it to be enacted/become law) until a final determination as to its legality is determined. That process generally takes years. This exact scenario played out in 2016 when a Federal court stayed another proposed increase to the salary threshold.
Just the Facts
To encourage informed public comments, the DOL also released frequently asked questions (FAQs) about the proposed rule. According to the FAQs, if these changes go into effect, 3.4 million additional salaried employees could be entitled to overtime pay. Currently, exempt employees are not required to be paid time-and-a-half (overtime) for hours worked over 40 in a workweek if they (1) are compensated on a salary basis at a rate not less than $684 per week (proposed to be $1,059); and (2) primarily perform specific duties (types of work) that are considered exempt. The proposed rule addresses only the salary basis test for these exemptions and does not change the duties test.
The DOL’s proposal also seeks to raise the total compensation requirement for exempt “highly compensated employees” (HCEs) from $107,432 to $143,988 per year. Currently, HCEs are exempt from overtime if they meet the salary minimum and perform one or more exempt responsibilities. The DOL is also proposing to automatically update these salary thresholds every three (3) years and has indicated that the actual salary threshold will be based on earnings data as of the date the final rule takes effect, meaning that the new salary amounts may be even higher if these changes survive court challenges.
Next Steps
Keystone’s Risk Management division is tracking developments of the proposed rule and plans to keep you informed of significant updates. Should it ever be enacted into law, we will be ready and available to provide employers with guidance, as always. In the meantime, employers should continue operating under current DOL regulations regarding exempt employees and HCEs.
If you are an employer with additional questions on this topic or any other HR topics, we are here to assist you and your organization. Feel free to call our HR Helpline at 855-873-0374.
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