The rumors circulating since June 2021 have proven to be true: the U.S. Department of Labor (DOL) has proposed a rule that would substantially increase the salary basis threshold for exempt employees.
As a reminder, employees who do not meet one of the overtime exemptions under the Fair Labor Standards Act (FLSA) – the executive, administrative, professional, certain computer, outside sales, or highly-compensated employee exemptions – must be paid overtime (1.5x the regular rate) under federal law for all hours worked in excess of 40 hours per week. Such employees are classified as nonexempt employees. Note that state and local laws may be more generous to employees than this federal FLSA standard.
To be considered exempt from overtime pay, an employee must meet a duties test and must be paid on a salary basis. “Salary basis” means that the employee regularly receives a predetermined amount of compensation each pay period that is not subject to reduction because of variations in the quantity or quality of work.
In addition, the employee must be paid at least the applicable salary threshold. Currently, the salary threshold for exempt employees is $35,568 per year ($684.00 per week). The DOL’s proposed rule would increase the salary threshold from $35,568 to $55,068 per year (or at least $1,059 per week). The proposed rule would also increase the salary threshold for the highly-compensated employee exemption from its current level of $107,432 to $143,988 per year.
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