DOL Proposes an Increase to the Salary Level Thresholds for Exempt Employees

On August 30, the Department of Labor issued a Notice of Proposed Rulemaking (NPRM) that significantly increases the earning requirements for the salary level test for the FLSA’s “white-collar” exemptions (executive, administrative, and professional). The update is estimated to require a reclassification of nearly 4 million currently exempt employees. The salary level test for the white-collar exemptions is proposed to increase from $684 per week to $1,059 (or an annual salary of $55,068). In addition, the DOL has proposed to increase the highly compensated employee exemption from $100,000 annually to $107,32.

In proposing the new rule, the DOL seeks to set the white-collar salary level threshold to the 35th percentile of weekly earnings of full-time salaried workers in the US’s lowest-wage census reason. The salary level test threshold for highly compensated employees is intended to be set at the 85th percentile of full-time salaried workers nationally. The DOL has also proposed a regulation that automatically increases the thresholds every three years to meet the then-current and respective 35th and 85th percentiles.

In response to the proposed rule, employers should consider conducting an analysis of their employees who fall under the white-collar and highly compensated exemptions to determine if the increased thresholds will remove any such employee from the qualifications of either exemption. If a previously exempt employee no longer meets the new salary level test, employers should either re-classify the employee as non-exempt or consider increasing the employee’s salary so that it meets the new salary level threshold.

The NPRM was published in the Federal Register on September 8, 2023, and employers have until November 7, 2023, to submit written comments. After the comment period and DOL’s review period, the DOL will publish the final rule, with an effective date that is currently proposed to be 60 days after the publication of the final rule. Employers should ensure that all their exempt employees who fall under one of the white-collar or highly compensated exemptions meet the new salary level thresholds before the effective date of such final rule.

If you have any questions about exempt or non-exempt FLSA classifications, or how the new proposed rule may affect your organization, please contact your Kunzler, Bean & Adamson Attorneys.

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