Update on Proposed FLSA Exemption Rules

As the law currently stands, the salary threshold for executive, administration, and professional (“EAP”) exemptions is $455 a week or $23,660 annually.

On July 6, 2015, the Department of Labor (“DOL”) officially published its Notice of Proposed Rulemaking announcing proposed changes to the FLSA overtime regulations.  The DOL proposed to increase the salary threshold for the EAP exemptions to equal the 40th percentile of earnings for full-time salaried workers ($921 per week, or $47,892 annually for a full-year worker.)  In addition, the threshold for highly compensated employees (“HCE”) would increase from $100,000 per year to $122,148 per year.

The DOL’s goal is to set a compensation threshold that more effectively distinguishes between employees who meet the duties requirements of the EAP exemptions and those who likely do not, without necessitating a return to the more detailed long duties test.  The DOL also reasoned that the proposed increase in the HCE salary threshold will ensure that the HCE exemption continues to cover only employees who almost invariably meet all the other requirements for exemption.  Further, the DOL also proposed to automatically update the standard salary and compensation levels annually.  This means that the threshold could change based upon either a fixed percentile of earnings or on the CPI-U.

We encourage employers to submit a comment.  Any written comments to the new proposed overtime rules must be submitted on or before September 4, 2015 and may be submitted at www.regulations.gov.  We will monitor the rulemaking process and continue to assess the impact of the proposed changes.

 

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