New DOL Overtime Rule Impacts Manufacturers
The United States Department of Labor finally published its proposed regulation raising the minimum salary to be paid under the “white collar” exceptions to the Fair Labor Standards Act. To refresh your recollection, virtually every worker must be paid at least minimum wage (currently $7.25 per hour under federal law, with many states having a higher minimum wage) and overtime for all hours worked in excess of 40 hours per week. Certain employees are “exempt” from these requirements, however, if they are working as executive, administrative or professional employees, are paid on a “salary basis” and earn at least the minimum salary threshold. Prior to 2016, the minimum salary had been set at $455 per week ($23,660 per year), or $100,000 per year for so-called “highly compensated” workers.
In 2015, the Obama DOL attempted to raise the minimum salary to $913 per week ($47,476 per year). At the same time, the threshold salary for highly compensated workers was increased to $134,004 per year. In 2017, a Texas federal court enjoined enforcement of the rule. The DOL appealed that decision to the Court of Appeals, but asked that the appeal not be heard until it had a chance to review its options.
On March 7, the DOL published the revised rule. As expected, the Trump DOL also decided it was time to raise the minimum salary to be paid exempt employees from the current $455 per week to $679 per week ($35,308 annually) (a 49% increase over the current standard). At the same time, however, the DOL raised the “highly compensated” minimum salary from $100,000 to $147,414 (a 47% increase). The DOL estimates that raising the salary threshold potentially impacts 1 million American workers.
The period for public comment on the proposed regulation will end in 60 days (May 6, 2019). The DOL expects the regulation (if left unchanged) to take effect in January 2020. It is too soon to say whether business groups will seek to halt implementation of the revised rule.
Manufacturers should examine their workforce to determine the number of employees potentially impacted by the new regulation. For those currently exempt employees making less than $35,308 annually, an employer may be able to take advantage of a rule provision which permits the payment of a non-discretionary bonus of up to 10% of wages. Other employees may have to be converted to hourly workers or have their base pay adjusted in order to maintain their exempt status.