Last week the Department of Labor released the long awaited proposed regulation updating the salary level test for determining when an employee is exempt from earning overtime.
The Proposal
- Raises the threshold to $35,308/year ($679/week).
- Reverts to the 2004 methodology that focused on the 20th percentile of full-time wage earners.
- Makes no changes to the duties tests.
- Does not implement an automatic update feature.
- Increases the total annual compensation requirement for “highly compensated employees” (HCE) from the currently-enforced level of $100,000 to $147,414 per year which is higher than the Obama DOL reg’s threshold of $134,004.
- Would allow nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10 percent of the standard salary test requirement.
- Such bonuses include, nondiscretionary incentive bonuses tied to productivity and profitability.
Background
- The Obama administration issued a final regulation in 2016 that would have raised the salary threshold from $23,660/year ($455/week) to $47,476/year ($913/week).
- That regulation was later invalidated by federal district judge Amos Mazzant, in a challenge that ABA supported, on the basis that the salary threshold was so high it made the duties test—considered the key determinant—no longer relevant and beyond the statutory authority of the Secretary.
- That decision is currently on appeal in the 5th Circuit.
What’s Next
Comments will be due 60 days from the date the proposal is published in the Federal Register which should happen later next week or the week after. ABA will be working with the US Chamber of Commerce and National Association of Manufacturers (NAM) to provide feedback.
Want more information? Consult the DOL’s webpage on this proposal.
