• Exemption May Require Salary of Over $50,000
  • July 8, 2015 | Authors: Eric E. Kinder; King F. Tower
  • Law Firms: Spilman Thomas & Battle, PLLC - Charleston Office ; Spilman Thomas & Battle, PLLC - Roanoke Office
  • The United States Department of Labor (“DOL”) is proposing a significant increase to the salary employers must pay many employees in order to “exempt” them from overtime, a change that would affect the payroll of almost all employers. The Fair Labor Standards Act (“FLSA”) guarantees that most employees will receive time-and-a-half overtime pay for hours worked over 40 in a workweek. The FLSA exempts certain categories of employees from this requirement, especially certain executive, administrative, professional, outside sales and computer employees (these are often called the “white collar” exemptions). To be considered exempt, employees must be paid a minimum amount on a salary basis. Currently, the minimum salary level, which was last updated in 2004, is $455 a week ($23,660 for a full-year worker).

    The rulemaking announced by the DOL today would increase that threshold to $921 per week (as of 2013) and then increase the threshold annually to keep up with the cost of living. The DOL’s stated goal is to keep the salary threshold at the 40th percentile of weekly earnings across the country. The DOL estimates that the minimum salary to make an employee eligible for exemptions when the rule goes into effect will be $970 per week (or $50,440 for a full year).

    This is just an announcement of an intended rule. The DOL’s next step will be to solicit comments about the proposal for the next 60 days. After that, the DOL will issue a final rule, which may or may not change the salary threshold, with an effective date by which all employers must comply. That effective date will likely be in late 2015 or early 2016.