Department of Labor Announces New Fair Labor Standards Act Proposed Rule Regarding Exempt Employees

As anticipated for the past year, the DOL has announced a proposed rule change that would broaden federal overtime pay regulations by raising the minimum salary from $455 per week or $23,660 per year to $921 per week or $47,892 per year to qualify for the FLSA’s white collar overtime exemption. Additionally, the proposed change will increase the salary requirement for highly compensated employee exemption from $100,000 to $122,148 per year.  An employee not meeting the salary basis must be paid overtime. The regulations were last updated in 2004 and it is anticipated that the rule change may affect as many as 11 million employees.

What does this mean for employers?  If the proposed rule is enacted, employers will have to make the decision to, in some cases dramatically, increase employees’ salaries or convert exempt employees to non-exempt hourly employees with overtime eligibility.  Employers should consider how fluctuating overtime eligibility may affect payroll in comparison to current salaries.

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