As we previously reported here, in May 2016 the U.S. Department of Labor (“DOL”) issued a new overtime exemption rule that had significantly raised the minimum salary threshold required for an employee to qualify for the federal Fair Labor Standards Act (“FLSA”) “white collar” overtime exemption from $23,660 to $47,476. The rule was set to go into effect on December 1, 2016 but shortly before the rule took effect, the proposed rule had been blocked by a Texas federal courthouse after a challenge from 21 states and subsequently invalidated in September 2017.
On Thursday, the DOL issued the anticipated proposed replacement of the Obama administration’s overtime rule, raising the minimum salary threshold required for employees to qualify for the FLSA “white collar” exemption from $23,660 to $35,308 per year (approximately $679/week). Under the “white collar” exemption, employees must be paid on a salary basis and perform primarily executive, administrative, or professional duties. The salary threshold was last increased in 2004 during the Bush administration. Keith Sonderling, the acting head of the DOL’s Wage and Hour Division said that public feedback the agency received in response to the RFI and in-person meetings it held with stakeholders “overwhelmingly agreed that the 2004 levels need to be updated.” The proposed regulation will update the salary levels every four years but only after notice-and-comment periods rather than an automatic update as was implemented under the previous proposal.
The Trump administration announced that approximately 1 million workers will now be eligible under the proposed rule as opposed to 4 million workers under the Obama proposal. Nonetheless, it is likely that this proposed rule will be subject to numerous legal challenges from business groups who will argue that this is a significant increase and worker advocates who will argue that the increase still isn’t high enough.
The proposed regulation has been submitted to the Office of Federal Register (“OFR”) for publication and is currently pending placement on public inspection at the OFR and publication in the Federal Register. Once the proposed rule is published in the Federal Register, the public will have 60 days to comment on the proposed regulation. The DOL anticipates this regulation will take effect starting in January 2020.
COUNSEL TO MANAGEMENT:
Given the increases in minimum wage in California, this proposed law has no direct impact on California employers as under California law, employers must comply with the law which is most favorable to employees. Currently, California’s salary basis exemption exceeds the proposed federal requirement outlined above. [$12/hour x 2 =$24 x 40 hours = $960/week or $49,920 for employers with 26 or more employees]. However, this law could impact employers who are subject to the federal requirements under the FLSA. Should the FLSA apply to your business please keep in mind that employees exclusively employed in agricultural are exempt from FLSA’s overtime provisions and the proposed rule would not apply. Of course, this exemption should be reviewed carefully on a case-by-case basis by your labor and employment counsel. Should you have any questions regarding whether your business falls within federal law requirements or California law requirements for proper overtime compensation, contact the experts at the Saqui Law Group, a division of Dowling Aaron Incorporated.