DOL Changes to Pay Threshold for Nonexempt Employees

nonexempt employee

Following in the footsteps of the Department of Labor (DOL) under the Obama Administration, the agency released a notice of proposed rulemaking (NPRM) that would raise the minimum salary to qualify for a white collar exemption under the Fair Labor Standards Act (FLSA).

In 2016, the DOL proposed an increase that would have more than doubled the salary threshold requirements, but a coalition of 21 states objected and filed suit, challenging the proposal.

A Texas federal court granted a preliminary injunction halting enforcement, and the subsequent change in federal administration caused the appeal to be shelved.

After releasing a request for information (and receiving more than 200,000 comments) and holding six “listening sessions” around the country, the DOL did raise the minimum salary for the white collar exemption, albeit for a lower amount than originally proposed.

Now the agency is pursuing another increase even larger than the one from 2016 that was successfully challenged and then scrapped.

According to the NPRM, the weekly salary amount for executive, administrative or professional employees would rise from $684 to $1,059 per week, or from $35,568 to $55,068 annually. Workers earning below this amount would be eligible for overtime payment regardless of their job duties.

“Highly compensated” employees would also see their salary threshold increased under the proposal to $143,988 per year or $1,059 per week.

In addition, the DOL is considering establishing automatic updating for the earnings levels every three years, which the agency said would be a more efficient and predictable way to ensure the thresholds reflect current earnings data.

Public comment will be accepted on the NPRM until November 7, 2023.

To read the NPRM, click here.

Why it matters: The DOL—which said it engaged in “extensive outreach” to employers, workers, unions and other stakeholders, including 27 listening sessions with more than 2,000 participants—predicted that the proposed changes would extend overtime payment to an estimated 3.6 million salaried workers, which would have a significant impact on employers. If passed, legal challenges to the new rule will be sure to follow.