IT’S BAAAAAAAACK! THE FLSA “WHITE COLLAR” ANNUAL SALARY THRESHOLD INCREASE!
Updated: Jan 29, 2020
Over three years ago, the Department of Labor informed employers the minimum amount “white collar” positions are to be paid (those positions that are not eligible for overtime, thus “exempt”) was going to more than double!! The annual salary threshold was going from $23,660 to $47,476! There was a HUGE up-roar of hundreds of thousands of comments from businesses and agencies across the country. If it weren’t for a federal judge in Texas putting a hold on that on November 22, 2016 (10 days before the change was to have gone into effect!), employers would have had to deal with that reality – despite their vehement concerns!
That same judge did grant a permanent injunction, ruling that the Department of Labor exceeded its authority by making overtime status depend predominately on a minimum salary level, over the job duties of a exempt position. But, it was appealed in the 5th District. That’s on hold for now, awaiting the DOL’s new rule.
Sooooooooo, the issue is far from dead!
The current $23,660 annual salary threshold has not changed since 2004 and reasonable people do believe it’s time for it to be adjusted. The question is, by how much! Alexander Acosta, the Secretary of Labor is of the opinion it should be between $32,000 and $35,000 - $33,000 is a good round number. Some believe it should be increased by the level of inflation, that would put it at $30,576 annually.
The process of trying to change the FLSA rule is under way again – with the Department of Labor issuing a Notice of Proposed Rulemaking (NPRM) in 2017 to request information and comments on the appropriate salary level for exemption of executive, administrative and professional employees. The Request for Information Comment Period ended September 25, 2017. The rulemaking effort is expected to start in March 2019 – launching another round of public comments for a potential effective date of late 2020 (likely AFTER the presidential election.)
It could be back to the future…with all of the delays the Department of Labor has had trying to get key positions passed Senate confirmation, legal appeals, and the 2020 election, employers could be back to the $47,476 exempt salary threshold level of 2016, if it turns back to a Democrat-led administration.
What does this change mean for employers?
Review your job descriptions for accuracy in job duties, make sure they accurately reflect the functions of the positions.
Determine if the position is truly non-exempt or exempt. Use the DOL’s Exempt guidelines
Verify that you are currently paying your exempt employees a salary of at least $455 a week. If not, you will need to make sure you are paying them overtime for any hours they work over 40 in the weeks they make less than $455.
Look at the exempt positions that are currently making less than $47,476 and see what it would take to bring them up to that rate. (Do that for $35,000 - $30,000 too). If that is too expensive, talk with those employees to find out how many hours they are working a week, let them know that when the law changes, you will have to closely watch their hours worked to avoid overtime.
Here’s a couple of options: 1) If the work is such that it requires more than 40 hours a week to get it done, you could consider hiring another employee. But don’t forget that has additional cost: payroll taxes, benefits, etc.; 2) Do the math and see if the salary increase would be less than the possible overtime or the cost of another employee.
If you have employees in the same job with salaries that are on both sides of these potential new salary thresholds – take special care - make the employees all the same, either exempt or non-exempt! Do not set yourself up for a whole different type of problem: employee relations issues; morale problems; or lowered productivity!!
Dust off the plan you had in place for December 1, 2016 and make sure it is still appropriate – using the above guidelines.