DOL Proposes New White-Collar Exemption Rule

On August 30, the Department of Labor (DOL) released a new proposed regulation on the white-collar exception to the Fair Labor Standards Act’s (FLSA’s) overtime rules. Generally, DOL proposes that the salary threshold rise to $55,068/year (and suggests the number could go higher by the time the proposal is finalized), and that it be updated automatically every three years.

The rule, written by DOL’s Wage and Hour Division (WHD), would:

• Increase the salary threshold above which the white-collar exemption would apply—under the proposed rule, workers earning $1,059/week ($55,058/year) or more would be eligible for the exemption. Workers earning below that level would qualify for overtime pay for hours they work beyond 40/week. This is an increase from the current salary threshold of $684/week ($35,568/year). Note, though, that in a footnote, the proposed regulation suggests that the $55,058 threshold is projected to rise to $1,140/week ($59,285/year). This is because the regulation is basing the threshold amount on Bureau of Labor Statistics (BLS) salary data from the poorest Census region. The final threshold amount will be based on the most recent BLS data available, which DOL projects will mean a higher threshold than that specified in the proposed regulation. “In the first quarter of 2024,” the regulation said in a footnote, “the Department projects that the salary threshold could be $1,158/week or $60,209 for a full-year worker.”
• The annual compensation threshold for highly compensated employees would go from the current $107,432/year to $143,988/year.
• WHD is proposing to establish a mechanism under which salary/compensation levels would automatically adjust every three years.

The proposed rule also makes clear that where the FLSA’s minimum wage rules apply in U.S. territories, the overtime protections (and exemptions) will also apply.

The FLSA’s white-collar exemption—applicable to executive, administrative, professional, outside sales, and computer employees—has been the subject of see-sawing regulatory activity for more than five years. DOL has solicited and received input from both employers and workers and has attempted to rewrite the current exemption in a way that reflects input from court cases challenging previous attempts to rewrite the rule.

The proposal was opened for public comment after it was published in the Federal Register on September 8. The public comment period will run until November 7, 2023. What could be thousands of comments, both pro and con, are expected.

Generally, private-sector employers opposed the upward revision of the white-collar exemption salary/highly compensated salary numbers. However, DOL and most workers argue that the current law exemption thresholds do not reflect years' worth of inflation.

Prospects: It is likely that the new proposed white-collar exemption salary levels will be finalized after the agency considers the input it receives during the comment period. This is because virtually all of the arguments against adjusting the exemption’s salary threshold were provided to DOL during the time it was developing its NPRM. But it will still take months before the rule (perhaps as modified) takes effect.

NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.