The U.S. Department of Labor (DOL) has unveiled a proposed rule that could have significant implications for employers and their exempt employees. While it’s important to note that proposed rules often evolve, and their effective dates can be uncertain, this development warrants attention due to its potential impact on businesses.
Proposed Changes
Currently, certain employees categorized as executive, administrative, and professional (EAP) must earn a minimum of $684 per week (equivalent to $35,568 per year) to qualify for exempt status from minimum wage and overtime regulations. The new proposal suggests raising this salary threshold to $1,059 per week (approximately $55,068 annually) for EAP employees.
Additionally, employees classified as highly compensated employees (HCE) currently require a minimum annual salary of $107,432. The proposed rule seeks to increase this amount to $143,988 per year for HCE status.
Furthermore, if adopted in its current form, the rule would establish automatic updates to the EAP salary level and HCE total annual compensation every three years.
Timing
The proposed rule is expected to be published soon, triggering a 60-day comment period. During this period, the DOL will consider input from stakeholders. Following this phase, the DOL will review feedback and potentially make revisions before finalizing the rule. While the exact timeline is uncertain, these changes could take effect approximately 60 days after the publication of the final rule.
It’s worth noting that previous attempts to alter salary minimums by the DOL faced legal challenges just before implementation, making litigation a possibility this time as well.
Impacts on Employers
Although it’s early to gauge the full implications of this rule change, employers should consider the following:
- Reclassification of Employees: Be prepared to reclassify some employees as nonexempt, which may entail administrative challenges.
- Overtime Costs: If exempt employees earn less than the proposed minimum salary and work more than 40 hours weekly, budget for overtime pay.
- Operational Adjustments: If overtime pay is unaffordable, explore workload redistribution, efficiency improvements, or potential changes to your business model.
- Employee Training: Transitioning from exempt to nonexempt status requires training on time tracking, break policies, and adherence to overtime regulations.
- State Law Compliance: If state laws mandate higher minimum salaries than federal regulations, follow the more stringent state requirements.
While the full impact of the proposed rule remains uncertain, proactive planning and staying informed are key. Employers should monitor developments closely, assess their workforce, and be prepared to adapt to potential changes in minimum salary requirements. We will provide further updates and resources to help businesses navigate these changes when the final rule is published.
If you wish to review the proposed rule in detail, you can access it here. Stay tuned for more information as this situation evolves.
