Tug-of-War in Washington

Tug-of-War in Washington

For the third time since 2016, the United States Department of Labor (DOL) has proposed changes to the minimum salary an employee must receive to be exempt from overtime pay requirements.

Under the Fair Labor Standards Act (FLSA), employees who work more than forty hours in a work week must be paid time and a half for every hour over forty that is worked. The rule applies to all workers unless they fall into one of several statutory so-called “white collar” exemptions based on their job duties. Historically, management level employees have been designated with “administrative” or “executive” exemptions. In most cases, in order to qualify for an exemption, an employee must be paid a minimum base salary. Democratic and Republican administrations have engaged in a tug-of-war over how high that base salary should be.

In December 2016, the Obama administration doubled the salary threshold, moving it from $23,660 to $47,500 per year. So, even if an employee was clearly performing what would otherwise be deemed an exempt job (e.g., general manager), she was to be paid overtime if she didn’t earn a minimum of $47,500 annually. That was a steep increase for many employers, especially those in retail businesses like restaurants and department stores that rely on assistant managers to cover extra shifts or to perform both managerial and non-managerial tasks.

Ultimately, a federal judge blocked implementation of the new rule. In the meantime, a new administration took office. President Trump’s Department of Labor issued new rules setting the base threshold at $35,568. Now, the Biden administration wants to raise it to $55,000. Like the Obama rule, the current proposal would tie future increases to the salary threshold automatically to the rate of inflation. But unlike the ill-fated Obama rule, the current rule includes a severability provision. The intention is to keep the $55,000 threshold in place even if the automatic increases are ruled improper.

The proposed rule is open for public comment until November 7, 2023. After that, expect the department to issue a final rule that looks a lot like the proposal. Once it does, employers need to comply unless and until a court says otherwise.

Questions about whether you are compliant? Give us a call at 248.477.6300.

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