In 2016, the U.S. Department of Labor proposed to change part of how employees are classified as exempt under the Fair Labor Standards Act. Exempt basically means exempt from the overtime premium rate required by the FLSA, and employees are generally exempt only if they meet a specific exemption defined in the law. Executives, learned professionals, certain administrators, creative professionals and computer workers, and inside salespeople are typically exempt.
In addition to qualifying for an exemption, exempt workers must also be paid on a salary or fee basis and earn at least $23,660. The minimum pay level is called the "salary threshold." The 2016 proposal was set to more than double the salary threshold to $47,476, increasing the number of low-wage workers eligible for overtime. However, last year the rule was blocked by a court and never went into effect.
Now, the DOL is working on a replacement for the Obama-era proposal. Lobbyists for employers and employees recently testified before the agency on hopes and expectations for the new rule.
Employers, naturally enough, prefer the existing salary threshold. They warned that increasing the threshold to $47,476 would have meant either increasing the salaries of exempt workers in order to maintain their exemptions, or reclassifying those workers as non-exempt, which employees might perceive as a demotion. And, the increase might have hit rural employers especially hard.
According to one attorney who testified, many employers predicted negative results if the salary threshold were raised that high:
- 6.4 percent of companies said they would cut positions.
- 12.4 percent said they would reduce annual bonuses.
- 21 percent said they would limit flexible working arrangements to prevent employees from working illegally off the clock.
Advocates for employees generally approved of the 2016 proposal and wanted the DOL to defend it in court. They argue that employees who perceive reclassification to non-exempt status as a demotion should be told that reclassification is merely a legal issue and will not affect their chances for promotion.
One attorney said he has represented workers who qualified for the executive exemption but who were nevertheless receiving food stamps and subsidized school lunches. In other words, even executives were working long hours but barely getting by.
Other employee advocates argued that if the salary threshold is not raised, the DOL should adopt a stricter duties test like the one it dropped in 2004. This would be another way of reducing exemptions for people who have no real power in the organizations they work for.
Are you barely making it despite being an exempt worker who is ineligible for overtime? You may want to have your situation reviewed by an employment law attorney.