08 Feb The DOL is considering dramatic revisions to its “white collar” and highly compensated employee exemptions
The U.S. Department of Labor is considering significant changes to the criteria governing which employees may be classified as “exempt” from mandatory overtime pay. Under federal law, non-exempt employees must be paid an hourly rate of at least 1.5 times their regular rate of pay for every hour they work after working forty hours per week.
The DOL is considering raising the minimum salary level which employees must be paid before qualifying for the executive, administrative, or professional exemptions (often referred to as the “white collar” exemptions). The new salary requirements would also apply to computer employees. If approved, these changes will expand the number of employees entitled to mandatory overtime pay by millions of individuals.
Under the proposed changes:
- Employees will not qualify for the white collar exemptions unless they are paid a salary equal to at least the 40th percentile of weekly earnings of full-time, salaried employees, pursuant to the DOL’s Bureau of Labor Statistics‘ annual determinations.
- The current minimum salary level for the white collar exemptions is $455 per week, or $23,660 per full year; under the proposed changes, the minimum salary level would be raised (pursuant to BLS data for the year 2013) to $921 per week, or $47,892 per full year.
- If the DOL adopts the 40th percentile standard, it will probably rely on data from the first quarter of 2016. Based on the DOL’s most current data, the final rule will likely require weekly pay of at least $970, or $50,440 per year.
- The DOL is considering the adoption of automatic, annual updates to its salary and compensation levels. This would involve automatic adjustments to the standards based on either a fixed percentile of wages or to the “Consumer Price Index – Urban.”
An additional DOL proposal would raise the minimum annual compensation required for the “highly compensated employee” exemption to an amount equal to the 90th percentile of earnings for full-time, salaried employees ($122,148 per year pursuant to the DOL’s most recent data). The current minimum salary for the “highly compensated employee” exemption is $100,000 per year.
The DOL has indicated that it may issue a final rule on these issues in July 2016.