On August 30, 2023, the U.S. Department of Labor (“DOL”) issued a new Notice of Proposed Rulemaking (Proposed Rule) that would update the salary threshold for the White Collar Exemptions under the Fair Labor Standards Act (“FLSA”). The last update to the salary threshold took place on January 1, 2020, when the threshold was increased from $455/week (23,660/year) to $684/week ($35,568/year). If enacted, the Proposed Rule would elevate the threshold to $1,059/week ($55,068/year).
Some additional points of note are as follows:
- The current salary threshold of $684/week was set at the 20th percentile of salaried earnings for non-hourly workers in the lowest wage census region in 2019. The new threshold of $1,059/week would set the salary threshold at the 35th percentile of salaried earnings for non-hourly workers in the lowest wage census region for calendar year 2022 (DOL intends to update this figure to reflect the most current data when the final rule is issued, meaning that the final salary threshold will likely be higher than the figure contained in the Proposed Rule).
- Beginning 3 years from the date that the $1,059/week salary threshold takes effect, and every 3 years thereafter, the Proposed Rule would update the salary threshold to match the 35th percentile of weekly earnings for full-time non-hourly workers in the lowest wage census region.
- The exemption for highly compensated employees will be updated to reflect that a highly compensated employee must earn at least $143,988 total annual compensation, of which at least $1,059/week must be paid on a salaried basis. Like the regular salary threshold, the threshold for highly compensated employees would also be updated every three years using the 85th percentile of weekly earnings of full-time non-hourly workers nationally.
- The Proposed Rule also updates the regulatory language relating to additional payments for exempt White Collar employees, clarifying that employees who are paid at least $1,059 each week, paid on a salary basis, may be paid additional amounts without losing the exemption or violating the salary basis requirement.
- The provisions relating to automatic updates for the white collar salary threshold and the exemption for highly compensated employees also include language that would allow the DOL to delay the implementation of a scheduled automatic update where the unforeseen economic or other conditions warrant.
The Department estimates that adoption of the Proposed Rule Would effect an estimated 248,900 employees who are currently exempt under the current salary threshold.
The Proposed Rule does not propose any specific changes to the duties test necessary to qualify for the White Collar Exemptions. However, the DOL welcomes comments on all aspects of this proposal, including the duties tests necessary to qualify for the White Collar Exemptions.
A full copy of the regulations is available here. Interested persons may submit written comments to the Proposed Rule within 60 days after its publication in the Federal Register.
Although many of the above-referenced points may change when the DOL issues its final regulations, we believe it is prudent for all businesses to conduct a preliminary assessment of their exempt employees, to flag potential problem areas in advance. Employers should also keep in mind that differences between FLSA and the Pennsylvania Minimum Wage Act add some complications to this process. Please contact us when you are ready to begin this assessment.
This Client Alert provides a general summary of new legal developments, and is not meant to provide legal advice. If you have any questions or concerns about this Client Alert, please do not hesitate to contact us at (570) 341-8800.
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