The news is out that the US Department of Labor has (finally) proposed the long-awaited revisions of the FLSA regulations. In a bold initiative, the agency proposed to raise the salary threshold to almost $1000 per week (to $50,440 annually). This is more than double the current minimum salary level of $455 per week, or $23,660. Under this proposal, it is estimated that five million more workers would be overtime-eligible.
The proposal will be published in the Federal Register and then the 60-day comment period will follow. The DOL further proposed to build into the threshold an automatic escalator provision that will keep the salary level “current,” whatever that may mean.
The agency is also seeking input on whether changes should be made to the duties test, especially whether the federal regulations should adopt the California model, where to be exempt, a minimum of at least 50 percent of worker time must be spent performing exempt duties to qualify for an exemption.
There is some sentiment that the new salary threshold will lessen litigation. Interestingly, this comes from Justin Swartz, a plaintiff side wage-hour attorney who commented that “employees and employers should welcome the new rules because the salary basis threshold is a clear line that’s easy to interpret and will cut down on misclassification lawsuits.”
The counter to that comes from the National Retail Federation which states that “the administration seems to be under the distorted impression that they can build the middle class by government mandate. Turning managers into rank-and-file hourly workers takes away the career opportunities offered by private sector entrepreneurs and job creators that are the true path to middle-class success.”
Ironic as it is for me to agree with an adversary, I welcome this proposal because it will decrease litigation because a very bright line will be established. Many FLSA collective actions involve assistant managers and other first-level supervisory personnel who make just more than the current minimum and whose job duties may or may not meet the primary duty test of the regulations. Now, those cases will go away.
Conversely, an employer paying an employee $1000 per week is likely having them work at a job that will be deemed exempt if scrutinized. I also believe (strongly) that an employer’s labor costs need not rise due to a possible “wholesale” re-classification of employees. The correct hourly rate can be computed or arrived at so that, even with the overtime hours worked, at the time and one-half rate, the aggregate outlay for the employer will be the same as before.
On balance, so far,—a good thing. With that said, now let’s see what happens with the duties tests revisions.
That may be a wilder ride!