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DOL discloses proposed overtime rule and new FLSA exemption threshold
By Katherine Fechte on March 8, 2019 at 2:20 PM

Clock with the shadow of a dollar sign, representing overtimeThe Department of Labor (DOL) issued its long-awaited proposed overtime rule and new exemption threshold under the Fair Labor Standards Act (FLSA) on March 7, 2019. The regulation, which replaces the controversial rule issued under the Obama administration in 2016, raises the salary threshold from the $23,660 minimum established in 2004 to $35,308, or $679 per week. As such, employees earning under $35,308 a year must be paid overtime for hours worked in excess of 40 each week. Above this salary level, eligibility for overtime varies based on job duties.

The new proposed threshold is more than $12,000 below the $47,476 threshold set forth in the 2016 regulations the Obama DOL issued. Early projections estimate the current change will create overtime eligibility for an additional 1.1 million workers, which falls significantly below the 4.2 million overtime eligible workers projected under the 2016 rule. Importantly, where the 2016 rule created a formula by which the salary threshold would increase automatically with inflation, here, the 2019 rule allows the DOL to update the minimum salary at its discretion every four years. Additionally, each subsequent proposed threshold update will continue to be subject to the notice-and-comment rulemaking requirement. In determining the proposed overtime rule, the DOL says it received more than 200,000 comments as part of its 2017 Request for Information (RFI).

For highly compensated employees, the DOL raised the salary threshold from the $100,000 mark set in the 2004 regulations to $147,414. This amount is actually about $13,000 higher than the Obama administration's 2016 rule. And while the minimum salary thresholds saw an overhaul, the DOL declined to make any changes to the duties tests, which make up part of the FLSA exemption analysis.

The proposed rule, which is expected to take effect in January 2020, will now be subject to a 60-day public comment period. More information about the proposed rule is available at www.dol.gov/whd/overtime2019, and the DOL encourages anyone interested to submit comments about the proposed rule electronically at www.regulations.gov, in the rulemaking docket RIN 1235-AA20.

In anticipation of the 2020 implementation date, employers should begin reviewing and evaluating the status of their current employees and creating a schedule to update positions as needed. If you have questions about the proposed overtime rule, the classification of your employees, or other FLSA compliance issues, the attorneys in our Employment & Labor Practice Group can help you navigate these changes.

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