DOL Proposes (Again) to Significantly Raise the Salary Threshold for Exempt Employees—But Don’t Panic Yet, Employers

On August 30, 2023, the Department of Labor (“DOL) issued a proposed rule that would increase the salary threshold for employees to qualify for one of the “white collar” exemptions from the overtime requirements of the Fair Labor Standards Act (“FLSA”). Under the proposed rule, employees would not be eligible for the administrative, executive, or professional exemption unless they made at least $1,059 per week ($55,068 annually). The current salary threshold for these exemptions is $684 per week ($35,568 annually). If this increase takes effect, an estimated 3.6 million workers, unless they received a hefty salary increase, would lose their exempt status and be entitled to overtime. And the proposed rule would automatically raise the salary threshold every three years based on current earnings data.

Feel like déjà vu? That’s because a similar rule, with equally significant consequences, was almost implemented in 2016. At that time, the DOL, under the Obama Administration, announced that the salary requirements for these exemptions would nearly double, from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). This change was estimated to eliminate the overtime exemption for nearly 4.2 million employees and also included automatic increases in the future. Instead, in a case brought against the DOL by 21 states, a Texas court blocked the rule on November 22, 2016, a mere eight days before it was to take effect.

Ultimately, after President Trump was elected, the DOL withdrew the rule before courts could issue a final order on its legality. Then, in 2019, the DOL did raise the salary requirement for these exemptions, but much more modestly, taking the threshold to $679 per week ($35,308 per year), with no automatic raises thereafter.

Now, the DOL, under the Biden Administration, seeks to re-implement a more aggressive and continued increase to the salary threshold. But for now, employers should take a wait-and-see approach. This is only a proposed rule. For a period of 60 days, the DOL will receive public comment on the proposed rule. And there are sure to be many comments submitted. More than 270,000 individuals and organizations submitted comments on the proposed rule that resulted in the rule adopted in 2016. It will take time for the DOL to review and consider those comments. Moreover, a legal challenge to the proposed rule is nearly certain. Thus, while employers should be aware of the proposed rule (and certainly make sure they are in compliance with the current salary threshold for their exempt employees), making any changes at this point would be premature.