On March 7, 2019, the United States Department of Labor (the “DOL”) unveiled its long-awaited proposed rule raising the minimum salary threshold required for workers to qualify for the Fair Labor Standards Act’s exemption, now being $35,306 per year. This has been anticipated for some time ever since the Obama administration proposed that the salary threshold increase to $47,000 to be eligible for an exemption. While not quite at the number hoped by the Obama administration, it is a big jump from the current threshold of $23,660. This is the first increase to the threshold since 2004, during the George W. Bush administration. The new rule also proposes regular increases to the threshold every four years.
Based on a forty (40) hour work week, the salary equates to about $17.00 per hour. It applies to executive, professional, and administrative workers, a/k/a “white collar” exemptions. The increased threshold will most certainly make more workers eligible for overtime pay, which the DOL estimates could affect over a million workers.
The DOL expects implementation to begin in January 2020. During this time, employers will be able to analyze whether they want to increase current exempt workers’ salaries upward to meet the new threshold, or possibly transfer them to hourly employees. There is an opportunity for public comment for sixty (60) days after the proposed rule is published in the Federal Registrar.
As a result of these changes, employers should start preparing for how to treat properly classified exempt employees who are now making more than $23,660, but less than $35,306 per year. This only affects the salary basis of the exemptions’ tests, and so employers must also be sure that exempt employees also perform duties that permit them to be exempt. Finally, this only impacts the federal law. To the extent state law governs the employer’s business, they must be mindful of the appropriate thresholds within their state. For example, in New York, the current threshold is anywhere between $43,264 (for New York employers not located in New York City, Long Island or Westchester) to $58,500 (for employers in New York City with eleven (11) or more employees.
With the upcoming changes, it is important to update policies and pay practices to stay in compliance. For questions as an employer or employee in New York, please contact the Law Offices of Yale Pollack, P.C. at (516) 634-6340 or email@example.com