Compliance

Looks Like the DOL Just Put Its New Salary Test on the Discount Rack

By Jon Hyman

May. 3, 2016

It’s been a few weeks since we last peeked in on the Labor Department’s upcoming increase for the FLSA’s salary test (Winter is coming … for the FLSA’s salary test). It’s long been expected that the DOL would increase the salary test for the administrative, professional, and executive exemptions from $23,660 per year (or $455 per week) to an expected $50,440 per year (or $970 per week). Now, however, it’s been reported that the DOL has had a change of heart and will step up the salary threshold to $47,000 per year (or a nice, round, $903.85 per week).

From Thompson’s HR Compliance Expert:

The U.S. Department of Labor is considering a lower, $47,000 salary threshold for its upcoming overtime regulations, according to news reports….

The version of the rules that DOL proposed last June would more than double the threshold for its Fair Labor Standards Act white-collar exemptions. If the rules were implemented as proposed, employees only would be eligible for those overtime exemptions if they were paid $970 per week, or $50,440 annually.

DOL sent final rules to the White House’s Office of Management and Budget on March 14. A group of Democratic lawmakers urged OMB to approve the rules quickly while Republicans in Congress introduced legislation to block the rules.

OMB has been meeting with stakeholders every few days and, according to various news reports, DOL agreed to consider a $47,000 threshold. Final rules are expected any day.

While this is certainly good news for employers, I question whether it is good enough. Consider, for example, California, the Willy Wonka Chocolate Factory of employment law. The current salary threshold for exempt employees is $41,600. Even at the supposed lower $47,000 mark, the federal standard would eclipse California by 13 percent. Yet, compare the cost of living in Los Angeles to Cleveland. It costs an approximate 37 percent more to live in Los Angeles than Cleveland. And that’s not nearly as big a difference as Omaha, Nebraska (52 percent) or Jackson, Mississippi (64 percent). In other words, the $47,000 salary test is not an apples-to-apples comparison, and, even at this “lower” level, still imposes a significant economic burden on businesses.

For now, stay tuned. No one outside a select few in D.C. (who aren’t talking) have seen the final regulations. They are still on track to be published this summer with an expected effective date in September.

Jon Hyman is a partner in the Employment & Labor practice at Wickens Herzer Panza. Contact Hyman at JHyman@Wickenslaw.com.

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