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Your Opinion Matters: Submit Comments to a Newly Proposed Federal Overtime Rule

Your Opinion Matters: Submit Comments to a Newly Proposed Federal Overtime Rule that Intends to Raise the Annual Salary Requirement's for the Fair Labor Standard Act's Overtime Exemptions.

Under the Fair Labor Standards Act (FLSA), employees must receive at least time and one-half their regular pay rate for all hours worked over 40 in a workweek unless an exemption applies. For an exemption to apply, an employee’s specific job duties and salary must meet certain minimum requirements under the FLSA. Currently, the salary threshold for an exemption to apply is $23,660 per year ($455 per week). On March 22, 2019, however, the U.S. Department of Labor (DOL) published a proposed rule to update and revise the FLSA's salary threshold for executive, administrative, professional, outside sales, and computer workers exemptions.[1]

The proposed rule raises the salary threshold for employees to qualify for these exemptions from $23,660 per year ($455 per week) to $35,308 per year ($679 per week); the proposed rule does not alter the current "job duties" tests also necessary to qualify for one of these exemptions. If the proposed rule is finalized, more than a million more American workers would be eligible for overtime pay, and employers would be required to pay overtime rates to all employees making less than $679 per week, regardless of their job duties or whether they are paid on a salary basis.

The proposed rule also increases the salary threshold for the "highly compensated" employee exemption (HCE) from $100,000 in total annual compensation to $147,414. This too would have a significant impact on increasing the number of employees who would be eligible for overtime rates of pay. Under the current HCE exemption, employees who earn at least $100,000 per year are exempt from FLSA's overtime requirements if they satisfy a less stringent "job duties" test than that applied to the administrative, executive and professional employee exemptions.

Recognizing that the salary threshold needs to exceed $455 per week to more effectively serve its purpose, while also considering the 2016 final rule that raised the minimum salary threshold to $47,476 per year ($913 per week) but was invalidated by the U.S. District Court for the Eastern District of Texas on August 31, 2017,[2] the DOL, through this proposed rule, attempts to strike a balance. What are your thoughts?

Interested parties are encouraged to submit comments about the proposed rule electronically on or before May 21, 2019 (click here to submit a comment). These comments will be considered by the DOL when developing final regulations, which the DOL anticipates will take effect on January 1, 2020.

Kane Russell Coleman Logan PC will continue to monitor developments concerning the new overtime rule. In the meantime, employers should start reviewing employee classifications and determine how this rule may impact their business, should the proposal take effect next year. And, as always, please do not hesitate to contact any member of our Employment Practice Group if you have any questions about the forthcoming rule.

[1] Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, 84 Fed. Reg. 56 (proposed March 22, 2019) (to be codified at 29 C.F.R. pt. 541).

[2] See Nevada v. United States Dep't of Labor, 275 F. Supp. 3d 795 (E.D. Tex. 2017).