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FMG Law Blog Line

Department of Labor Unveils Its Long-Awaited Proposed Overtime Rule

Posted on: March 11th, 2019

By: Brad Adler

On March 7, 2019, the U.S. Department of Labor (DOL) released its long-awaited proposed rule that would revise the white collar overtime exemption regulations.  In its proposed rule, the DOL proposed raising the minimum annual salary for exempt status from $23,360 to $35,308 (an increase in the weekly rate from $455 to $679).  This is a significantly smaller increase than the increase that had been adopted by the DOL in 2016 ($47,476 per year) while President Obama was in office.  Of course, a court blocked that increase from taking effect.

Like the 2016 final rule, the DOL’s new proposal would allow employers to satisfy up to 10% of the $35,308 minimum salary requirement by the payment of nondiscretionary bonuses, incentives and commissions.  Notably, however, while the 2016 rule required that the bonuses be paid at least quarterly, the new proposal contemplates that they can be paid annually (or more frequently if desired).  Specifically, employers would have one catch-up period at the end of a 52-week period to make up any shortfall in the employee’s salary to bring it up to the required minimum.

As a result of this proposed provision, the employer could pay the employee a guaranteed minimum salary of $611.10 per week (90% of the weekly salary) and, if bonus and incentive compensation do not bring the person up to the minimum salary level by the end of the year, the employer would have one chance to make up the difference.

In addition to increasing the minimum salary, the DOL also proposed increasing the minimum annual compensation to qualify for the FLSA’s “highly compensated employee” exemption, from $100,000 to $147,414 (of which, at least $679 per week must be paid on a guaranteed salary or fee basis).

The public will have 60 days to submit comments on the proposed rule, but the rule ultimately is expected to take effect on January 1, 2020.

If you have any questions or would like more information, please contact Brad Adler at [email protected].

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