DOL Announces Proposals Regarding Exempt Employee Compensation

The Department of Labor (DOL) announced two rule proposals in March of 2019 regarding the compensation of Exempt Employees under the Fair Labor Standards Act (FLSA).  Below is a brief summary of the two proposed rules.

Regular Rate Update Proposal

The FLSA’s regular rate rules govern the types of compensation that employers are allowed to exclude when calculating the regular rate of pay for Exempt Employees.  The rules are somewhat complex and dated, having not been significantly altered in roughly 50 years.  This new rule proposal is meant to define specifics types of pay that may be included or excluded when calculating the regular rate used in calculating overtime pay.

Under the proposed rule, the following types of compensation may be excluded from the employee’s regular rate:

  • Wellness programs, onsite specialist treatment, gym access, and fitness classes
  • Employee discounts on retail goods and services
  • Payments for unused paid leave, including paid sick leave
  • Reimbursed expenses, including travel expenses (subject to some regulations)
  • Tuition programs

The proposal also clarifies rules regarding discretionary bonuses, benefit plans, necessity of agreements, and changes to other pay-related regulations.  The DOL fact sheet below is a two-page document that further explains the proposed update:

DOL fact sheet:

Minimum Salary for Exempt Employees Proposal

In this proposal, the DOL is seeking to raise the minimum salary requirement for administrative, executive, and professional Exempt Employees.  The rule would increase the minimum salary from the current level of $23,660 ($455 weekly) to a much higher $35,308 ($679 weekly).

In raising the minimum salary, employers would be allowed to count nondiscretionary bonuses, commissions, and incentive payments of up to 10% of the required minimum.  Employers would also be allowed to make one “catch up” payment during the first pay period of the year to count toward the minimum requirement of the previous year (this payment counts only for the previous year and may only be 10% of total compensation).

The proposal also raises the minimum compensation requirement for the Highly Compensated Employees exemption from $100,000 annually to $147,414 annually.

While the proposal does not stipulate automatic future adjustments to these levels, the DOL intends to propose updates every four years.

Other changes and details contained in the proposal may be found in the DOL fact sheet:

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