Department of Labor Announces Changes to Overtime Exemption Rules

Bowles Rice Labor and Employment e-Alert
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Department of Labor Announces Hotly-Anticipated
Changes to Overtime Exemption Rules

On March 7, 2019, the United States Department of Labor issued a Notice of Proposed Rulemaking to update and revise its regulations under the Fair Labor Standards Act governing exemptions from overtime pay requirements for executive, administrative, professional, outside sales, and computer employees.  The DOL’s proposed rule will increase the minimum required salary level for the so-called “white collar” or “EAP” exemptions from $455 per week ($23,660 per year) to $679 per week ($35,308 per year) and has been in development since the agency’s previous attempt to update its rules was blocked by a federal court in November 2016.

The FLSA requires an employer to pay at least a minimum wage and pay overtime (time-and-a-half) for hours worked in excess of 40 hours per workweek, unless an employee is exempt from the act’s protections.  Currently, employers are not required to pay overtime to employees who perform certain exempt job duties and who are paid a salary of at least $455 per week ($23,660 per year).  This salary threshold was set in 2004.  In 2016, the DOL attempted to increase the minimum salary for exempt employees to $921 per week ($47,892 per year), and to create an automatic process for adjusting the minimum salary threshold every three years.  The 2016 rule change was blocked by a nationwide injunction just weeks before the rule was to go into effect.  The DOL later announced that it would undertake new rulemaking to revise the salary level, and solicited public comment in 2017 about what the appropriate salary level should be.

The proposed rule announced yesterday will:

  1. increase the required minimum salary from $455 per week ($23,660 per year) to $679 per week ($35,308 per year) for the “white collar” or “EAP” exemptions;
  2. increase the total annual compensation requirement for “highly compensated employees” from $100,000 per year to $147,414 per year; and
  3. allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the required minimum salary, so long as these payments are made on an annual or more frequent basis.

The rule does not change the “job duties” requirements for the “white collar” or “EAP” exemptions, or change the overtime protections for police officers, fire fighters, paramedics, laborers, or non-management employees in maintenance, construction, and similar occupations.  The rule also does not include an automatic process for updating the minimum salary in the future, although the DOL states that it is committed to periodically reviewing the salary thresholds through future rulemaking.

The Effect on Employers

The DOL’s proposed rule has been anticipated for some time and will have a wide-ranging effect on employers.  The DOL estimates that approximately 1.1 million currently exempt employees will become eligible for overtime under the new rule, absent some intervening action by their employers.  Now is the time to prepare.  Employers should begin reviewing their pay practices to identify potentially-affected employees, and then analyze whether it will make business sense to pay those employees overtime or increase their salaries if the proposed rule goes into effect.

Employers that have not recently done so should also consider auditing their pay practices to ensure that their exemption decisions are legally defensible under the FLSA and state law.  In fiscal year 2018 alone, the DOL handled 11,018 cases with overtime violations, recovering $194,203,854 in unpaid overtime for 217,884 employees.[1]  Many employers mistakenly believe that an employee is exempt from overtime protection so long as the employee is paid the minimum salary required by the FLSA.  However, an employee is only exempt from overtime if the employee is paid the minimum salary and performs exempt work.  Employers who are unsure whether their pay practices meet the requirements of the FLSA and state law should consult an experienced employment attorney for guidance.

The public may submit comments on the DOL’s Notice of Proposed Rulemaking within 60 days of its publication in the Federal Register, after which the DOL may take action by issuing a final rule.  For more information, please see the announcement posted to the Department of Labor, Wage and Hour Division’s website at:

[1] See United States Department of Labor, Wage and Hour Division, Fiscal Year Data for WHD, available at:

For more Information:
Please contact a member of the Bowles Rice Labor and Employment Law Team if you have questions or need additional information about how these changes may affect your business.

Ronda Harvey
(304) 347-1701

Jennifer Hagedorn
(724) 514-8940

Robert Kent
(304) 420-5504

Pamela Ferrell
(304) 420-5590

J. Tyler Mayhew
(304) 264-4209

About the Author:
Bowles Rice attorney Tyler Mayhew focuses his practice on labor and employment law, commercial litigation and appellate litigation. He advises employers on human resources and compliance matters, and employment policies, and defends employers against claims asserted in court, before administrative tribunals and in arbitration. He has successfully defended employers from employee discrimination and harassment claims, misclassification claims, wage and hour claims, deliberate intent claims, and wrongful termination claims.

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