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DOL Announces New FLSA Overtime Exemption Test with $35k Minimum

Labor & Employment Alert Otto Immel

On March 7, 2019, the long-awaited Trump-era proposed revisions to the Fair Labor Standards Act "white collar" exemption rule was announced. Spanning some 220 pages, the results mostly look like what many observers expected, an increase in the minimum compensation to just over $35,000 to qualify for overtime exemption while leaving the duties tests untouched. The DOL anticipates that the proposed rule will go into effect January 1, 2020.

So what changed?

The minimum salary threshold for an employee to qualify for the FLSA white collar exemption was raised from $23,660 ($455 per week, a level set in 2004) to $35,308 ($679 per week). Although this is a substantial increase from what it was, it is still about $12,000 lower than the Obama-era rule that was struck down by a federal judge in Texas.

Employers may use non-discretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10 percent of the standard salary level.

The rule proposes updating the minimum white collar salary threshold every four years, following public notice-and-comment periods (as opposed to automatic increases as set forth in the Obama-era proposed rule).

What didn’t we see?

No changes were made to the job duties test.

The widely hoped-for regional variations and a lower threshold for non-profit entities, among the “wish list” items that had been the subject of much debate, were absent from the proposed rule.

What now?

The proposed rule is pending imminent publication in the Federal Register. Once published, the public will have a 60-day comment period that will be followed by the issuance of the Final Rule, sometime thereafter. With the DOL's anticipated January 1, 2020 effective date for the proposed rule, employers should stay closely attuned to the final rule process in preparation for necessary compliance updates.

For more information on the proposed rule and how best to prepare for its adoption, please contact your local Quarles & Brady attorney or:

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