July 15, 2019

July 15, 2019

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July 12, 2019

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DOL Releases Proposed Higher Salary Threshold for Federal Overtime Exemptions

On March 7, the U.S. Department of Labor (DOL) announced its long-awaited Notice of Proposed Rulemaking to increase the salary threshold for the so-called “white collar exemptions” from the Fair Labor Standards Act’s overtime pay requirements. The proposed rule would raise the required salary level substantially for executive, administrative, and professional employee exemptions from $455 per week ($23,660 per year) to $679 per week ($35,308 per year). According to the DOL, more than one million additional American workers will become eligible for overtime compensation based on this change. The rule does not adjust the duties’ tests for the white collar exemptions.

The DOL’s new proposed rule represents a more modest increase to the salary threshold than the DOL’s last proposal. Employers will recall that on May 23, 2016, the DOL published its final rule that more than doubled the salary threshold for exempt workers to $913 per week ($47,476 per year). But that rule was enjoined from implementation by the U.S. District Court for the Eastern District of Texas on November 22, 2016, and later invalidated by the court on August 31, 2017. The Fifth Circuit is currently holding an appeal of the district court’s decision in abeyance.

DOL reports that the proposed $679 weekly salary threshold represents the projected 20thpercentile of earnings of full-time salaried workers in the lowest paid census region and retail sector. This was the same methodology it used to establish the current $455 per week threshold, but it based the new figure on current data and projections into January 2020 when the rule is scheduled to take effect.

The rule proposes separate salary levels for workers in Puerto Rico, Guam, the Virgin Islands, the Commonwealth of the Northern Mariana Islands ($455/week), and American Samoa ($380/week), and sets a higher base rate for employees in the motion picture industry ($1036/week).

Additionally, the DOL proposes a going-forward process to review and adjust the salary threshold every four years by notice of proposed rulemaking (with accompanying comment periods). This approach, too, diverges from DOL’s 2016 rule, which would have featured automatic updates to the salary thresholds.

Employers may want to take note of one particular feature of the proposed rule. The current proposed rule expressly allows for the inclusion of certain nondiscretionary bonuses and incentive payments – like nondiscretionary bonuses tied to productivity and profitability – towards up to 10 percent of the standard salary level. To count for this purpose, these bonuses must be paid at least annually (not quarterly, as the 2016 rule had required).

Finally, the new proposed rule also adjusts the salary threshold for “highly compensated employees,” from $100,000 to $147,414. And for highly compensated employees, as well as situations where employers plan to use nondiscretionary bonuses and incentive payments to meet the minimum salary threshold, the proposed rule allows employers to make year-end “catch up” payments to bring employees to the required salary levels for exempt status.

Members of the public can submit comments about the proposed rule electronically at www.regulations.gov, in the rulemaking docket RIN 1235-AA20. After the rule is published in the Federal Register, the public will have 60 days to submit comments.

© 2019 Schiff Hardin LLP

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About this Author

Nora Kersten Walsh, Employment Law Litigator, Schiff Hardin Law Firm

Nora Kersten Walsh concentrates on all areas of labor and employment law, with an emphasis on employment-related litigation and employee counseling.

She has conducted federal and state court litigation, including appellate litigation, and has participated in hearings before:

  • The Equal Employment Opportunity Commission (EEOC)
  • Illinois Department of Human Rights
  • Chicago Commission on Human Rights, the National Labor Relations Board (NLRB)
  • State unemployment compensation tribunals

Ms. Kersten Walsh also provides input on labor and...

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Derek Barella Federal and State Labor and Employment Attorney Schiff Hardin
Partner Practice Group Leader, Labor and Employment

Resolving complex labor and employment disputes is the foundation of Derek’s practice. He counsels clients on federal and state labor and employment laws, and frequently defends claims in state and federal trial and appellate courts, as well as before arbitrators and administrative agencies such as the NLRB, EEOC, and U.S. Department of Labor.

With deep experience in traditional labor matters, Derek advises clients on collective bargaining relationships, including developing and implementing bargaining strategies, labor dispute contingency planning, maintenance of operations during labor disputes, responding to corporate campaigns, audits of union-sponsored health and welfare plans, unfair labor practice litigation, labor contract administration, and labor issues associated with the acquisition or divesture of corporate assets.

Clients with and without unionized workforces turn to Derek for help on employee engagement initiatives, organizing risk assessments, and implementing successful campaigns related to union certification and decertification elections. He represents clients across a broad range of industries, including health care, manufacturing, law enforcement, logistics and distribution, business consulting, retail, publishing, and financial services.

Beyond traditional labor matters, Derek's litigation experience includes defending claims involving civil rights and equal employment opportunity, wrongful discharge, wage payment and collection, and ERISA benefits, including class action claims for alleged vested retiree benefits. Derek also has considerable experience prosecuting and defending actions involving the enforcement of contractual restrictive covenants, as well as claims for unfair competition, employee raiding, and the protection of trade secrets.

Derek is the leader of the firm’s Labor and Employment Practice Group.

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