The U.S. Department of Labor (DOL) is expected to propose a higher salary level threshold for the management overtime exemption.

Currently, under the federal Fair Labor Standards Act’s (FLSA) so-called “white collar” salary level exemption, employers are not required to pay overtime to managerial workers who earn a minimum salary of $684 per week ($35,568 annually). While no new threshold level has been announced, employee advocates argue that the DOL should match or exceed the proposed increase of $921 per week which was first introduced in 2016.

This would significantly increase the number of workers eligible for overtime, and likely lead to a fight in federal court. We are more likely to see a middle-of-the-road increase to about $800 per week.

Under the FLSA, overtime pay of at least one and one-half times an employee’s regular rate of pay is required for work that exceeds 40 hours per week. Section 13(a)(1) of the FLSA includes an exemption from this rule for workers employed as bona fide executive, administrative and professional employees that are paid on a “salary basis” at a level of $684 or more per week.

This minimum salary threshold was last raised (from $455 per week to $684 per week) in 2016. At the time, the DOL sought an increase to $921 per week but was forced to settle for the more modest increase after business organizations protested what would have been an additional 4.2 million more workers eligible for overtime pay.

The salary test is not the only requirement to meet the overtime threshold exemption. For a manager to be considered exempt from overtime they must meet certain duties tests. These include spending most of their time doing managerial work, supervising two or more workers, and having the authority to hire and fire those employees (or at least have their recommendations on hiring and firing carry significant weight with the company).

Employers of all sizes should be aware that new overtime rules are in the works, although there will likely be several months of lead time to prepare for implementation. Gray, Gray & Gray will continue to monitor this evolving situation and provide updates. For questions, please contact us at (781) 407-0300.