Friday, March 8, 2019

New Salary Basis Test for Overtime Eligibility

Yesterday, the Department of Labor announced its much anticipated proposed new overtime regulation. This goes to whether employees can be considered exempt from overtime as administrative, executive, or professional employees. The only real change is to the minimum salary threshold required to count an employee as exempt from overtime (that is, no matter what employees' duties are, if they don't make the minimum, they must get overtime if they are otherwise qualified). As readers will remember, the Obama DOL increased the salary threshold to about $47,000 a year initially, and added a measure that would have it change automatically based on average wage increases; this rule was then put on hold by a district court, largely based on a holding that the DOL relied to much on salary and not enough on employees' duties.

The new proposed rule increases the minimum salary, but only to $35,308 per year (up from the current, Bush II-era $23,660 per year that is in place after the decision striking down the previous increase). It also raised the "highly-compensated employee" rule, which makes it easier to exempt employees making over a certain amount, from $100,000 a year to $147,414. The DOL did not propose an automatic increase to these salary levels, but committed to reviewing them regularly (I'll believe that when I see it).  Moreover, it left the duties test untouched.

As is the usual practice, this announcement kicks off the comment period, after which the DOL will produce a final rule. And, as is also the norm these days, there will be lawsuits. Some will argue that the increase in salary goes to far, while others will argue that the rule still makes it too easy to exempt employees. Expect mixed messages from the district courts, which parties will handpick to try to get more favorable rulings. The key, therefore, will be to wait for the appeals courts to step in. So, we should see something of a final word on the final rule in, I'd guess, a couple of years from now.

-Jeff Hirsch

Labor and Employment News, Wage & Hour | Permalink


Post a comment