In The Legal Loop

Deena B. Rosendahl Esq.

Department of Labor Proposed Rule Change: White Collar Exemption Update

Last week, the U.S. Department of Labor (“DOL”) released its proposed rule change updating the Fair Labor Standards Act’s overtime exemptions for executive, administrative and professional workers, otherwise known as the “white collar exemptions.”

Since 2004, the DOL’s white collar overtime exemption rule set the salary threshold at $23,660 per year or $455 per week. Although an increase was sought in 2016, attempting to raise the salary threshold to $47,476 annually or $913 per week, that effort was thwarted by court intervention.  The DOL has now released its much-awaited proposed rule change – again seeking to raise the salary threshold. 

The good news for employers? The new proposed rule change increases the salary threshold by significantly less than the last proposed increase. The DOL now proposes setting a white-collar overtime exemption salary level at $35,308 per year or $679 per week. Less good news for employers? The rule change also proposes raising the highly compensated worker salary threshold from $100,000 to $147,414. This means certain exempt workers may soon be pushed into non-exempt status, making them eligible for overtime pay. The increase for highly compensated workers is likely to cause employers the most concern.

There is some good news – the proposed change will allow employers to count certain nondiscretionary bonuses and incentive payments (i.e. commissions) as constituting up to 10 percent of a worker’s salary, helping employers establish certain workers meet the increased salary threshold. Additionally, the proposed rule change does not provide for automatic increases as the former proposed rule did.

Employers are urged to once again, review your job descriptions and prepare for a possible reclassification of certain positions. When reviewing job descriptions for those workers currently classified under the highly compensated exemption, consider whether their duties may qualify them for another exemption, such as the administrative exemption.

We will continue to monitor the passage of this rule and provide updates when available. In the interim, please contact Deena B. Rosendahl, Esq. at 201-947-8855 or for assistance reviewing your job descriptions and to ensure your workers remain properly classified.

Kaufman, Semeraro and Leibman, LLP