Proposed Federal Overtime Regulations Would Increase Minimum Salary Levels

By May 1st, 2018HR Blog

By Chris Olmsted, Esq., Ogletree Deakins

The US Department of Labor (DOL) issued its long-awaited proposed rule that would change the federal regulations of the Fair Labor Standards Act (FLSA).

The proposed updates to the regulations focus primarily on the salary thresholds currently in place for white collar workers to be considered exempt and propose the following:

  • Resetting the standard salary level from $455 per week to $921 per week, which equates to a yearly salary of $47,892 (although by the time the rule is final, the numbers are likely to be closer to $970 per week and $50,440 per year)
  • Increasing the total yearly compensation requirement needed to exempt HCEs, which is currently at $100,000 to $122,148
  • Establishing a mechanism for automatically updating the salary and compensation levels going forward to assure that the levels accurately reflect economic reality.

Notably, these minimum exempt salary levels areĀ higher than California’s minimum salary levels. Currently, the California minimum is $37,440. Beginning January 1, 2016, the minimum California salary will be $41,600.

In essence, the proposed revision generally means higher minimum salaries in order to satisfy the federal white collar overtime exemptions. For example, an individual designated as within the “executive” exemption (which covers positions with management and supervisory responsibilities) must earn at least $47,892 to meet the criteria for the white collar exemption from overtime pay, regardless of his or her duties. Employees with management or supervisory responsibilities earning less than the proposed salary threshold will no longer be exempt and will be entitled to overtime pay for hours worked in excess of 40 per week.

The proposed regulation, which includes provisions for salary updates, also means that employers will have to remain alert and up-to-date on future changes to salary and compensation levels that must be met to qualify for exempt status.

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