The Department of Labor has proposed an increase in the federal salary-level threshold for white collar exemptions to $35,308 per year from $23,660.

If finalized, the new overtime rule could result in the reclassification by employers of more than a million currently exempt workers as nonexempt and an increase in pay for others above the new threshold. The proposal does not call for automatic adjustments to the salary threshold, does not create different salary levels based on region of the country and does not make any changes to the duties test.

Unless exempt, employees covered by the Fair Labor Standards Act must receive at least time and one-half their regular pay rate for all overtime hours,

Meeting the salary threshold doesn’t automatically make an employee exempt from overtime pay; the employee’s job duties also must primarily involve executive, administrative or professional duties as defined by these regulations: https://www.dol.gov/whd/overtime/fs17a_overview.pdfYour dedicated HR Consultant can assist in clarifying whether or not a position qualifies for exempt status.

A note for our clients in California: Besides the federal salary requirement, the State of California adds to this, requiring that instead of the federal requirement, exempt employees in CA make at least twice the states minimum wage. This means that currently (as of Jan 1, 2019, an exempt employee working for an employer with 26 or more employees must be compensated at least $49,920 and $45,760 if working for an employer with 25 or less employees.

What Now?

Guardian HR does not recommend that employers reclassify just yet, as this currently is just a proposed rule and the first step in what will be a lengthy process before there will be a new final rule. Guardian HR will be keeping you up to date and informed, should any action become necessary.

We recommend that our clients continue to audit their exempt work forces to determine whether employees qualify for white collar exemptions under the primary duties criteria of the different exemptions:

  • For the executive exemption, employees’ primary duties must be to manage the enterprise or a department or subdivision of the enterprise, and to customarily and regularly direct the work of at least two employees, and the employee must have the authority to hire or re, or his or her suggestions and recommendations as to the hiring, ring or changing the status of other employees must be given particular weight.
  • For the administrative exemption, employees’ primary duty must be to perform office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers and must include the exercise of discretion and independent judgment with respect to matters of significance.
  • For a professional exemption, employees’ primary duty must be work requiring knowledge of an advanced type in a field of science or learning customarily acquired by prolonged, specialized, intellectual instruction and study, or in one of a few other similarly highly specialized fields, such as teaching, computer analytics and engineering

Authors: Allen Smith, J.D., Michael Cardman, Steffi Harges