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Employment Law Bulletin: Department of Labor Proposes Rule-making Entitling Over 1 Million White Collar Workers to Overtime Pay

Overtime

By Russell Landy, Partner, Damian & Valori LLP

On March 7, 2019, the United States Department of Labor (“DOL”) announced a proposed regulation that would provide approximately 1.1 million more American workers overtime eligibility.


The proposal seeks to increase the minimum salary required for an employee to qualify for an overtime exemption from the currently-enforced level of $455 per week ($23,660 per year) to $679 per week ($35,308 per year), and increase the total annual compensation for “highly compensated employees” from the currently-enforced level of $100,000 to $147,414 per year.

The proposal sets forth a commitment to a periodic review to update the salary threshold along with allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) to comprise up to 10 percent of the standard salary level.  The proposal makes no changes to the job duties test, no automatic adjustments to the salary threshold, and no changes in overtime protections for certain categories of employees. 

The Fair Labor Standards Act ("FLSA") generally requires covered employers to pay their employees at least the federal minimum wage (currently $7.25 an hour and $8.46 under Florida law) for all hours worked, and overtime premium pay of not less than one and one-half times the employee's regular rate of pay for all hours worked over 40 in a workweek.  There are, however, several exemptions from the FLSA's minimum wage and overtime requirements, including an exemption from both minimum wage and overtime protection for "any employee employed in a bona fide executive, administrative, or professional capacity ... or in the capacity of outside salesman ...."

Historically, the regulations implementing the white collar exemption have generally required each of three tests to be met for the exemption to apply: (1) the employee must be paid a predetermined and fixed salary; (2) the amount of salary paid must meet a minimum specified amount; and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by federal regulations.  

The proposed rules will be subject to a 60-day public comment period before being finalized; however, employers who have not already done so should begin reviewing their employees' job functions, rates of pay, and hours worked now to determine how this new proposed regulation will affect their payroll obligations to their employees.

The proposed rule falls short of the final rule change announced by the DOL in 2016, which sought to extend overtime protections to over 4 million white collar workers by more than doubling the salary threshold for an exemption from $23,660 (or $455 per week) to $47,476 annually (or $913 per week).  The rule change was to become effective December 1, 2016; however, a federal court ruling enjoined the new regulations from going into effect.

Based upon the proposed changes, employers will have the obligation to track the hours worked of the newly non-exempt employees - among other previously unnecessary record keeping requirements.  

In short, without making changes, employers of more than 1.1 million Americans could be subject to lawsuits seeking to recover minimum wage and overtime pay, liquidated damages, and attorneys' fees and costs should the employers not adapt to the new exemption rules.

This is a rapidly changing area of the law.  If you have any issues concerning this area, please contact our office or another competent lawyer to determine the most current law and regulations and address their applicability to your particular situation.