Employers have three months to prepare for the U.S. Department of Labor’s newly finalized overtime rule. But that is assuming they haven’t already, as the lift in the white-collar exemption threshold has been a long time coming.
On Tuesday the DOL released its final rule updating the salary threshold for white-collar exemption. Under the new rule, an employee must earn more than $35,568 a year, or $684 a week, to be exempt from overtime under the Fair Labor Standards Act’s salary test for white-collar workers. That jump from the current $23,660 watermark will make an estimated 1.3 million more American workers eligible for overtime, according to the DOL.
The final rule, which takes effect Jan. 1, lays out a more moderate increase than the roughly $47,000 annual earnings threshold employers braced for under the Obama administration. Employment attorneys say the $35,000 salary threshold will make more employees exempt in retail, hospitality, nonprofits and other industries with lower-paid supervisor roles.
The final rule comes with some rollbacks to the version initially proposed. The FLSA’s separate threshold for highly compensated employees, who are subject to a less stringent duties test for exemption, was set to jump from $100,000 to $147,414. But the final rule will merely bump the HCE threshold to $107,432.
Another point of consternation for employers was a proposed provision requiring the DOL to issue another rulemaking on the salary test every four years. That provision is gone in the final rule.