The FLSA requires covered employers to pay employees a minimum wage and overtime premium pay of at least 1.5 times the employee’s regular rate of pay for those employees who work more than 40 hours in a week. The FLSA provides exemptions from this requirement, however, for employees in executive, administrative, or professional positions, commonly dubbed the “white-collar exemptions.” To qualify for these exemptions, the employee must: (1) be a salaried employee; (2) have a salary that meets a minimum specified threshold; and (3) have job duties that primarily involve executive, administrative, or professional duties as defined by the regulations.
Under the proposed rule, the DOL would raise the minimum weekly salary threshold for the white-collar exemptions by over 50% from $684 per week to $1,059 per week (equivalent to an annual salary of $55,068). That said, the increase could be even higher because the DOL reserved in the proposed rule the ability to alter the proposed increase based on the most recent data available when the rule is finally promulgated. Indeed, the DOL projects the minimum salary threshold to be as high as $1,140 per week ($59,285 annualized) by the third quarter of 2023 and $1,158 ($60,209 annualized) in 2024—an increase of nearly 70% from the current $35,568 salary level. The DOL also seeks to increase the annualized salary threshold for the exemption for “highly compensated employees” (HCE) from $107,432 per year to $143,988 per year, a 25% increase. The DOL further proposes automatically updating these salary thresholds every three years. Lastly, the new salary levels also will apply to workers in the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, and the U.S. Virgin Islands.
Importantly, the proposed rule described above has not been finalized yet. All interested parties, including employers, have an opportunity to submit written comments addressing any concerns or opinions they may have about the NPRM by November 27, 2023, and can be submitted by clicking here. Once the commenting period closes, the DOL will consider the comments and issue a final rule with an effective date at least 30 days from the date of the final rule.
In the meantime, employers should consider and prepare for the potential impact the proposed rule may have on their business. Key considerations for employers include the following:
Although we expect there to be significant litigation over the implementation of the rule after the final rule is promulgated, employers should understand how the rule may affect them and their business model. Given the rule’s potential impacts and the immense burden it may place on employers, employers should promptly begin discussing and planning the best course of action to prepare for the anticipated changes. Klehr Harrison’s Labor and Employment Practice Group will continue to monitor these and other relevant developments in the law and, as always, are available to discuss any potential impact these developments may have on your organization.