On March 7, 2019, the U.S. Department of Labor proposed a long-awaited update to the regulations governing overtime exemptions for certain salaried employees, commonly known as the “white collar” exemptions. These exemptions apply to employees who are paid a set salary and whose jobs either require an advanced degree or involve the performance of certain administrative or managerial job duties.
Under the DOL’s new proposal, the minimum qualifying salary for employers to utilize the white collar exemptions would increase from $23,660 annually ($455 per week) to $35,308 annually ($679 per week). While this represents a significant increase, we expect it to affect a relatively small number of employees in Maine, given that state law already imposes a minimum salary requirement of $33,000 in order to utilize the white collar exemptions for employees in this state. Significantly, the new rules propose no changes to the duties tests that dictate whether employees perform the types of job duties necessary to qualify for the white collar exemptions.
The proposed rules will allow employers to satisfy up to 10% of the salary requirement using certain nondiscretionary bonuses and incentive payments, including commissions. In addition, the minimum salary threshold required for certain “highly compensated employees” will increase from $100,000 to $147,414 annually. This exemption applies only to employees who perform some, but not all, of the required job duties of a white collar exempt employee, and who are paid enough to be considered “highly compensated.”
Employers may recall that in 2016, the DOL under the Obama administration enacted new overtime rules governing the white collar exemptions, but these were blocked by a federal judge prior to taking effect, and the Trump administration moved to enact its own overtime rules instead of pursuing an appeal of the court’s ruling. Although the new proposed rules are still subject to change following a public comment period of at least 60 days, employers can breathe a sigh of relief that the new minimum salary threshold, even if it is adjusted somewhat, will likely be set far below the $47,476 salary that would have been required by the Obama-era rules. DOL estimates suggest that the new rules will affect approximately 1.3 million workers nationwide, far less than the 4.2 million workers estimated to be impacted by the Obama-era rules.
Another significant departure from the rules enacted in 2016 is that the salary threshold will not be subject to automatic adjustment in future years, although the DOL has indicated that it anticipates periodically updating the threshold through future rule changes.
All in all, if the proposed rules take effect in substantially their current form, most Maine employers should feel minimal impact. However, for employers that currently have exempt employees earning an annual salary of less than $35,308, they will need to either increase their employees’ pay above the new threshold or reclassify these employees as non-exempt and eligible for overtime.
For questions about the proposed overtime rule, or for any employment law-related issue, please contact Employment Practice Group partner Jim Erwin at 207.791.1237 or alert author Dan Strader at 207.791.1202.