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Proposed Rule Could Make Millions Eligible for Overtime

Illustration of the Fair Labor Standards Act (FLSA)

A proposed Department of Labor (DOL) rule could dramatically impact the number of workers who currently qualify as exempt employees, if it goes into effect as planned.

The federal agency announced on August 30 a proposed rulemaking that would raise the salary threshold to qualify for the “white-collar exemption” from $684 to $1,059 weekly, or from $35,568 to $55,068 annually. This would mean current exempt employees who make more than $35,568 but less than $55,068 per year would no longer qualify as exempt under the new rule. According to DOL, this change could affect 3.6 million salaried workers nationwide.

The proposed rule would also increase the threshold for “highly compensated employees” to $143,988 from $107,432. And it would build in an automatic increase in the threshold every three years.

What are the white-collar exemptions?

Employees who are categorized as exempt under the Fair Labor Standards Act (FLSA) are not eligible to receive overtime pay (time and a half) for hours worked in excess of 40 in a workweek. Most, though not all, exempt employees fall under one of the three “white-collar exemptions.” In addition to earning at least the required salary threshold, employees’ job duties must fall into one of these categories to qualify for the exemption:

  • Executive exemption: managers who have hiring, firing, and evaluation power, or similar decision-making authority. This exemption is based on job duties, not job title; a nominal “manager” who spends most of their time doing ordinary work tasks instead of management tasks is not considered exempt.
  • Learned professional exemption: employees who work in a field of science or learning, perform largely intellectual work that requires constant exercise of discretion, and typically acquire their knowledge through a prolonged course of specialized instruction. Examples of employees in this category include scientists, engineers, physicians, attorneys, and architects.
  • Administrative exemption: employees whose work keeps the business itself up and running, and who are authorized to make important decisions. Examples of jobs in this category include finance, legal compliance, public relations, and database administration, although this is highly contextual depending on the type of employer.

The new rule would not change the types of jobs that qualify for the exemption. It would only raise the minimum salary for workers with those job duties to be treated as exempt.

What does the new rule mean for white-collar workers?

Under the new proposed rule, employees who fall into one of the three categories listed above and currently make more than $35,568 but less than $55,068 would no longer qualify as exempt. At that point, employers would have two options: they can start treating those workers as non-exempt, which means they will have to start paying overtime, or they can increase salaries over the new threshold.

Either way, this is a win for workers. While there is a somewhat common perception that being exempt means you have greater responsibility and opportunities for advancement, the reality is that being exempt means your employer can get extra work for no extra pay. In theory, the upside for the employee is greater flexibility, but in practice, that flexibility often only comes into play when it benefits the employer.

What to do if your rights under the FLSA are violated

Our firm is closely monitoring this new rule and stands ready to protect employees if their rights are violated. If you have any reason to believe your employer has violated your rights under the Fair Labor Standards Act or another wage and hour law, give us a call or contact us online for a free consultation with the wage law attorneys at Nilges Draher LLC. We can help.

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