Labor Department Ready to Roll Out New Salary Test for Overtime Exemption

Stories are circulating that the US Department of Labor (DOL) is set to unveil their new salary threshold for exemption from overtime.

The proposal is said to establish $35,000 as the amount of annual salary an employee must earn in order to be considered exempt from overtime under the so-called “white collar” exemptions (executive, administrative and professional).  This rises significantly from the $23,660 level in place at present but falls short of the $47,000 threshold that the DOL proposed under the Obama administration.  That proposal was blocked in August, 2017, as we reported in Texas Judge Officially Strikes Down Increased Overtime Salary Threshold.

It appears that the new proposal will also address the issue of regular increases in the threshold based on inflation and other economic indicators but will not include the automatic increase that was included in the previous proposal.

Expect Opposition From Both Sides

Whatever the actual proposal, expect it to receive a hostile response from both sides of the political fence.  Employee advocates are expected to continue fighting for a higher threshold on the grounds that the Obama-era proposal was more reasonable, and that the real issue is that the “duties” test is so broad that it unfairly categorizes too many people as administrative or executive.

On the other hand, small employers contend that the increase will cause them to incur greater costs and that they will look to bring on more part time employees to avoid the increased overtime burden.  Larger employers are mobilizing behind the rationale of the Texas federal court – that the DOL focused too much the salary limit and not enough on the types of job duties that should make an employee exempt from overtime.

Bottom Line

Employers need not do anything right now as we await the actual rules, the mandatory public comment period and the inevitable litigation from one or both sides of the spectrum.  Then of course there is the possibility that this will not be resolved by the time of the presidential election in 2020, causing overtime reform to again be held hostage to political considerations.