The U.S. Department of Labor (“DOL”) announced this week that it intends to raise the exempt salary threshold from $684 per week to $1,059. This means that employees would need to earn $55,068 or more per year to be exempt from overtime pay. We don’t need to tell you what kind of impact this could have on your employees and your pay practices.
Now let’s be clear, this is just a proposal at this time, but things could move quickly and at HR Legal Logistics we’ll be watching for updates closely, but we believe this is important enough that you should be made aware of it. You could certainly (and should) at least think about possible changes to your compensation plans if this proposal becomes final in the future (2024). So what can you do exactly?
Determine which exempt employees currently earn annually between $35,568 (today’s threshold) and $55,068 (possible new threshold); and consider what you want to do with those employees, like switch them to a non-exempt status or raise their salary to meet the new threshold. Making this decision will be made easier if you know their actual time worked now so you can determine the impact your decision could have one way or another, so be certain to look at timesheets.
And if you decide to make them non-exempt, there are some considerations and consequences you’ll want to look at, which your employment lawyer should be able to walk through with you. One consequence, for example, is the idea of training those newly non-exempt employees. Likewise, if you decide to raise their salaries and make them exempt, there are some factors we want to make sure you’re satisfying that qualifies them for the exempt status. And with this, those pesky consequences reappear, like making sure you ensure policies are up to date that apply to the different statuses, like reimbursement or equipment policies.
Giving proper notice will be another important step, as well as ensuring that whatever actions you take do not affect employee morale. Both of which are things, your employment lawyer can help walk you through.
Oh, and what else does this new proposed rule do, because we all know it is never just about one thing (like raising the threshold)? It could change the following:
- Raise the “highly compensated employee” threshold exemption from $107,432 to $143,988;
- Allow for automatic salary threshold increases every three years; and
- Apply salary thresholds to U.S. territories subject to federal minimum wage (including exceptions like American Samoa).
Stay tuned for updates from the DOL as we learn about them on this proposal.
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