DOL Proposes Increase to FLSA Exemption Threshold
On March 7, 2019, the Department of Labor (DOL) released its long-promised proposed rule raising the minimum salary threshold required for workers to qualify for the Fair Labor Standards Act’s exemption threshold to $35,308 annually.
The new threshold is an $11,648 increase from the current threshold of $23,660, but is about $12,000 lower than the Obama administration’s threshold. The Obama administration’s rule was enjoined by a Texas federal judge and the Trump administration withdrew the government’s appeal which sought to enforce the rule.
Based on a 40-hour work week, the increase equates to about a $17.00 per hour rate. The new rule would apply to executive, professional, and administrative workers—also known as "white collar" exemptions.
The proposed rule includes another key provision: regular increases to the threshold every four years, following public comment. The opportunity for public comment is important because it will allow for the DOL to consider the impact on employers during the prior period, as well as the impact moving forward before making any adjustment.
Once the proposed rule is published in the Federal Register, it will be subject to a 60-day public comment period. The DOL estimates that implementation would begin in January 2020, giving employers ample time to adjust salaries upward or switch employees from salary to hourly. While it is difficult to predict whether there will be a challenge, it is likely that the proposed rule would survive such a challenge based on the current state of the economy and more modest nature of the increase when compared with the Obama-era rule. Additionally, the rule is closely in line with states and municipalities that have raised the minimum wage to $15.00 per hour. The DOL estimates that the proposed rule would make one million more workers eligible for overtime pay.
As with the Obama administration’s rule, this proposed rule has the potential to affect a number of positions unique to educational institutions. For example, a number of athletics department staff may meet the duties test, but not the new salary threshold. On the other hand, many coaches will continue to be exempt as teachers, even if their pay falls below the new threshold. Postdoctoral fellows are another worrisome category as they often work long hours independently and do not teach as their primary duty.
Though the rule is not final, institutions should work now to ensure the accuracy of their records with regard to the duties workers perform and their compensation levels. HR audits unearth misclassified employees, inefficiencies in the structural hierarchy, and documentation deficiencies. Conducting an HR audit before the final rule will allow institutions to identify the best path forward for complying with an increased salary threshold, regardless of the final dollar amount.
Saul Ewing Arnstein & Lehr’s Higher Education and Labor & Employment attorneys regularly assist clients in planning and conducting HR audits and implementing necessary changes, all while navigating the challenges unique to educational institutions. For more information, please contact the author or your regular Saul Ewing Arnstein & Lehr LLP point of contact for questions or assistance.