Proposed Department of Labor Rule Could Have Significant Impact on Businesses

April 23, 2019

By Robert Gilmore & Kirsten Mooney

On March 7, 2019, the U.S. Department of Labor (DOL) issued a new proposed rule raising the minimum salary-level threshold for white-collar exemptions from $23,660 per year (or $455 per week) to $35,308 per year (or $679 per week). The proposed rule will also raise the annual compensation requirement for the “highly compensated employee” exemption from the current $100,000 per year to $147,414 per year. The DOL did not, however, include automatic adjustments to the salary threshold, the creation of different salary levels based on region or size of employer, or any changes to the duties test for the white-collar exemptions.

While this change is far less aggressive than the proposed standards under the Obama administration, this new proposal may still significantly impact businesses and result in the possible reclassification of hundreds (if not thousands) of employees from exempt to non-exempt status. But meeting the salary-level threshold alone does not make the employee exempt. The employee must both (i) meet the salary-level threshold and (ii) perform the duties set forth for any of the white-collar exemptions. Below is a brief summary of the duties for each of the white-collar exemptions:

  • Executive Exemption: Employees’ primary duties must be to manage the enterprise, and to customarily and regularly direct the work of at least two (2) employees. The employee must also have the authority to hire or fire, or suggest or recommend as to the hiring, firing or changing of status of employees.
  • Administrative Exemption: Employees’ primary duties must be to perform office or non-manual work, directly related to the management or general operations of the employer. The employee must be able to use or exercise discretion and independent judgment with respect to matters of significance.
  • Professional Exemption: Employees’ primary duties must be work requiring knowledge of an advanced type in a field of learning customarily acquired by prolonged, specialized and intellectual instruction and study.

Please note that this proposed rule is just that: a proposal. It is possible that the final rule, anticipated to be released in January 2020, will differ significantly from this proposal. Employers should, therefore, wait to make any formal changes to employee status at this time. In the meantime, employers can begin auditing their employees to determine whether those currently classified as exempt actually fall under the white-collar exemptions (i.e. the employee falls under the current salary threshold and performs the duties listed above). With the DOL’s new proposal looming, this is a great time for employers to fix current errors in exempt status.

For more information, reach out to Robert Gilmore at rsg@kjk.com or 216.736.7240, or Kirsten Mooney at kbm@kjk.com or 216.736.7239, or contact any of our KJK Labor & Employment professionals.

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