As announced here, the U.S. Department of labor will issue a Notice of Proposed Rulemaking (NPRM) in early 2019 to determine the updated base salary level for exempt executive, administrative and professional employees. As a reminder, the proposal will replace the Obama administration’s proposed minimum salary level of $47,476 and update the current minimum salary of $23,660.
At this point, the new rules are a year away. However, for most employers, the problems created by the white color exemptions are already here. Let me explain.
The standard rule under the FLSA is that all employees must be paid minimum wage and overtime. The FLSA and state wage and hour laws have carved out some exemptions from this general rule. One of these exemptions is for what are known as “white collar” employees. To be exempt under the white collar exemptions, employees must satisfy three criteria:
- First, they must be paid on a salary basis, and that salary must not be reduced based on the quality or quantity of the employee’s work;
- Second, the employee must be paid at least a minimum salary level, which is currently $455 per week or $23,660 annually; and
- Third, the employee’s primary job duties must involve the kind of work associated with exempt executive, administrative, or professional employees (the “duties test”).
When employers are fined under a wage and hour audit or find themselves the subject of a wage and hour lawsuit, more often than not it is because they failed to pay their exempt employees their salary for any week in which the exempt employee performed work, or because their exempt employees were improperly classified as exempt to begin with. These risks are present now.
As we saw in 2016, over the coming year employees will be paying attention to this issue, and employers will be under greater scrutiny. Proactively auditing your exempt employees now to determine whether they are properly classified as exempt and ensuring you are paying them on a salary basis will leave you in a much better position to address the minimum salary levels when the DOL releases the NPRM. We can help.