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The Department of Labor Proposes that FLSA Exemption Salary Requirement Increase

On July 6, 2015, the United States Department of Labor announced it proposed rule to update and increase the salary requirement for an employee to be classified as exempt from overtime. Currently, the executive, administrative and professional exemptions to the FLSA require that the employee make at least $23,660 a year to qualify for the exemption. However, the DOL stated that this would fall below the poverty line for a family of four. The DOL stated that as it stands, “a convenience store manager, fast food assistant manager, or some office workers may be expected to work 50 or 60 hours a week or more … and not receive a dime of overtime pay.” The proposed rule would increase the minimum salary from $23,660 per year to $50,440 per year. Thus, there is a significant need to increase this minimum salary requirement to protect hard-working Americans.

The DOL’s proposed rule change states:

The Fair Labor Standards Act (FLSA or Act) guarantees a minimum wage and overtime pay at a rate of not less than one and one- half times the employee’s regular rate for hours worked over 40 in a workweek. While these protections extend to most workers, the FLSA does provide a number of exemptions. The Department of Labor (Department) proposes to update and revise the regulations issued under the FLSA implementing the exemption from minimum wage and overtime pay for executive, administrative, professional, outside sales, and computer employees. This exemption is referred to as the FLSA’s “EAP” or “white collar” exemption.

To be considered exempt, employees must meet certain minimum tests related to their primary job duties and be paid on a salary basis at not less than a specified minimum amount. The standard salary level required for exemption is currently $455 a week ($23,660 for a full-year worker) and was last updated in 2004. By way of this rulemaking, the Department seeks to update the salary level to ensure that the FLSA’s intended overtime protections are fully implemented, and to simplify the identification of nonexempt employees, thus making the EAP exemption easier for employers and workers to understand. The Department also proposes automatically updating the salary level to prevent the level from becoming outdated with the often lengthy passage of time between rulemakings. Lastly, the Department is considering whether revisions to the duties tests are necessary in order to ensure that these tests fully reflect the purpose of the exemption.