Department of Labor Told to Modestly Increase Salary Threshold for White Collar Overtime Exemptions, Over Several Years
As guidance to the U.S. Department of Labor (“DOL”) in its efforts to determine how best to increase the minimum salary for the White Collar Overtime Exemptions,FN1 a large gathering of employee and employer advocates from the Rocky Mountain region told the DOL to increase the current annual $23,660.00 salary threshold modestly over a period of several years, at the DOL Listening Session held in Denver on September 14, 2018. Campbell Litigation attended the Session and provides the following summary of participants’ responses to the following questions:
1. What is an appropriate minimum salary level range for the White Collar Exemption?
Generally, there is support for a new salary threshold in the $30,000.00 to $40,000.00 range, with the use of bonus and commission dollars being applied to reach the new salary threshold.
2. What are the benefits and costs of an increased salary threshold?
Several of the positive aspects related to an increased salary threshold include: compensating mid-level managers at proper hourly rates for the total amount of hours they work, and allowing employees to develop a reasonable work/life balance.
The drawbacks to an increase in the salary threshold include: increases in employer costs, including the logistical costs associated with tracking the time of managers who are re-classified as non-exempt; loss of freedoms and autonomy for managers who are re-classified as non-exempt; creating a “chilling effect” on hiring at salaries that exceed management budgets, which may affect non-profits in particular who carefully manage whether donations are spent on “mission” or “operational” costs.
3. What is the best methodology to determine an updated salary threshold?
Suggestions for the best method to update the threshold include: setting regional salary thresholds to reflect different costs of living; setting different urban and rural salary thresholds; using verifiable salary data to set salary thresholds (and setting the salary threshold at the lower end of the salary ranges); and having the new salary threshold take effect over a period of time (i.e., increase to the new threshold by 20% each year for five years).
4. Should the Department more regularly update the standard salary level and the total-annual-compensation level for highly compensated employees?FN3
The majority of commentators at the listening session support future increases even beyond a to-be-determined new threshold; however, commentators urged that future increases must be based on reliable data and sufficient advanced notice must be provided to allow employers to plan accordingly.
The DOL has one listening session left in Providence, Rhode Island on September 24, 2018, and will compile input gathered from all sessions in its attempts to revise the Rule. Campbell Litigation will continue to follow the DOL during this process.
FN1: See 29 U.S.C. § 213(a)(1). Currently, certain salaried, professional employees are exempt from federal overtime rules if they make at least $23,660 per year. The Obama Administration, in late 2016, issued a controversial rule change which proposed to double the minimum salary threshold to $47,320 per year. The proposed change would have gone into effect December 1, 2016, however, a federal judge enjoined its enforcement in November 2016. While the Trump Administration has denounced the proposed change as written, the DOL has signaled that it is amenable to an increase to the minimum salary threshold and is preparing to rewrite the Rule. For further information on the White Collar Exemption Rule proposal, see the following previous blog articles:
· Rocky Mountain Employer, DOL Seeks Time to Rewrite White Collar Overtime Exceptions, Rocky Mountain Employer Blog (Nov. 2, 2017), http://www.rockymountainemployersblog.com/blog/2017/11/2/dol-seeks-time-to-rewrite-white-collar-overtime-exceptions.
· Rocky Mountain Employer, Obama-Era Increase in Minimum Salary Level for Overtime Exemption Officially Invalidated, Rocky Mountain Employer Blog (September 14, 2017), http://www.rockymountainemployersblog.com/blog/2017/9/14/obama-era-increase-in-minimum-salary-level-for-overtime-exemption-officially-invalidated.
· Rocky Mountain Employer, U.S. Department of Labor Weighs in on Increase in “White Collar Exemption” Overtime Salary Threshold, Rocky Mountain Employer Blog (July 13, 2017), http://www.rockymountainemployersblog.com/blog/2017/7/13/us-department-of-labor-weighs-in-on-increase-in-white-collar-exemption-overtime-salary-threshold.
· Rocky Mountain Employer, Federal Judge Grants Preliminary Injunction Temporarily Enjoining DOL's December 1, 2016 Overtime Rule, Rocky Mountain Employer Blog (November 22, 2016), http://www.rockymountainemployersblog.com/blog/2016/11/22/federal-judge-grants-preliminary-injunction-temporarily-enjoining-dols-december-1-2016-overtime-rule.
FN3: White Collar Exemption Regulations; Public Listening Sessions, 83 Fed. Reg. 43,825 (Aug. 28, 2018).