On March 22, the Department of Labor (“DOL”) published a new proposed rule that would make several changes to current overtime law. The proposed rule, which is not yet in effect, would require that:
- Employees make at least $679 per week ($35,308 annually) to potentially be exempt from overtime. (The current requirement, which has been in place since 2004, is at least $455 per week or $23,660 annually.)
- Employers be allowed to use nondiscretionary bonuses and incentive payments such as commissions that are paid at least annually to satisfy up to 10 percent of the salary threshold.
- “Highly compensated employees” make at least $147,414 per year (compared with $100,000 under current law).
- Going forward, the DOL commit to periodically reviewing and updating the minimum salary threshold (after a public notice and comment period).
The proposed rule does not propose any changes to the “job duties” test (which, in addition to the salary requirement, requires that employees perform certain primary job duties to be eligible for exempt status).
Interested parties have until May 21, 2019 to submit comments before the rule becomes final. Even then, final rules can be challenged through litigation. (You may recall that the Obama administration previously attempted to change the salary threshold from $455 per week to $913 per week, but a federal judge blocked that rule from taking effect.)
There are no specific steps to take with respect to the proposed rule right now. However, there is no time like the present to review job duties and salaries to make sure your employees are properly classified as exempt and non-exempt. The cost of addressing misclassification issues on the front end is insignificant compared with the potential costs associated with litigation.
We will continue to keep you updated.