Change: A new salary threshold for exemption from federal minimum wage and overtime requirements is likely to take effect late this year or early next year. The new rule is expected to increase the salary threshold for most exempt employees from the current level of $35,568 per year to somewhere in the range of $46,800 to $52,000 per year. Annual adjustments for inflation may also be included. Some states have additional salary thresholds. Employers must pay the higher of the federal or state threshold for the employee to remain eligible for status as an exempt employee. In most cases (there are a few limited exceptions), the salary threshold applies regardless of an employee’s role or duties.
Timing: Last week, The US Department of Labor submitted its draft of the proposed new overtime rule to the White House’s Office of Management and Budget (OMB) for final review. The OMB has 100 days to review the proposed rule, which may be extended for up to 30 days. After the proposed rule is approved by OMB, it must be submitted for public comment for at least 30 days. Once approved, employers will receive at least 60 days’ notice before the new rule takes effect.
Next Steps: Employers should consider this proposed rule in anticipating payroll budgets and salary increases. And, with a change on the horizon, now is a good time to review all exempt classifications for compliance with federal and state requirements, including salary thresholds and duties tests.