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DOL Proposes Update to Salary-Level Test

from Craig Brightup, the Brightup Group


On March 7, the U.S. Dept. of Labor (DOL) released a proposed regulation to update the salary-level test for determining when a “white collar” employee is exempt from earning overtime.  The Obama Administration issued a regulation in 2016 that would have doubled the salary level from $23,660/year ($455/week) to $47,476/year ($913/week), but it was halted by a federal judge in a challenge led by the U.S. Chamber of Commerce on the basis that the threshold was so high it made the duties test no longer relevant and thus was beyond the statutory authority of the Secretary of Labor.  That decision is currently on appeal in the 5th Circuit while the Trump Administration proposes a more modest update to the overtime regulation, which was last adjusted in 2004.

The proposed rule raises the threshold to $35,308/year ($679/week) and, as advocated by business, reverts to methodology used in the 2004 rule that focused on the 20th percentile of full-time wage earners in the lowest income region of the country (identified as the South) and the retail industry.  It also makes no changes to the duties tests and has no auto-update feature, both of which are key points for business.  However, the regulation does seek comments on conducting regularly scheduled rulemakings to update the salary threshold.

With regard to what constitutes “regular rate” of pay for purposes of calculating overtime compensation, the proposed rule would allow nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10 percent of the standard salary test requirement.  Such bonuses include, for example, nondiscretionary incentive bonuses tied to productivity and profitability.  

One area business might question is the proposed rule’s increase in the total annual compensation requirement for “highly compensated employees” (HCE) from the current salary level of $100,000 to $147,414 per year, which is higher than the Obama DOL’s threshold of $134,004.  Trump’s DOL kept the methodology used by the Obama Administration for this salary level which resulted in the higher threshold.  However, most key elements of the proposed rule are more business friendly than the Obama-era rule and consistent with many of the points made by the Chamber and other business groups throughout DOL’s Listening Sessions and Request for Information (RFI) process.

Comments will be due 60 days from the date the proposal is published in the Federal Register, which should put the deadline in the first or second week of May.  The ASA GA/PAC Committee will be reviewing the proposed rule changes with consideration of submitting comments. Please contact Jim Kendzel, ASA Vice President of Advocacy at jkendzel@asa.net if you have specific concerns you would like the ASA GA/PAC Committee to consider. 

Note: additional information on this subject can be found on the ASA webpage.              more


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