On March 7, 2019, The US Department of Labor issued a proposed rule to raise the salary level test threshold of the Fair Labor Standards Act (FLSA) to $679 per week, or $35,308 per year. The current salary test threshold is set at $455 per week, or $23,660 per year. The FLSA salary level test indicates that any employee who earns under the threshold amount is not considered exempt from the FLSA, and is required to be paid overtime. According to the announcement from the DOL, with this proposed increase, overtime eligibility would be expanded to more than one million workers in the US.

While the increase in the salary test threshold will lead to more workers being eligible for overtime pay, it is important to remember that the salary level isn’t the only criteria on which to base an employee’s exempt status. Employees must also be proven to be paid on a salary basis, as well as pass the duties test. The duties test determines if an employee performs exempt job duties in one of three categories – executive, professional and administrative. These job duties are not based on the employee’s job description but on the duties actually performed on a regular basis.

The FLSA is a federal-level guideline. Each state is able to establish their own standards for qualifying as exempt from overtime. Cases in which the state and federal guidelines differ, whether that difference is the salary level or stricter duties included in the duties test, the stricter standard will apply.

The process to finalize these proposed changes will be a timely one, but it is expected that the Department of Labor will try to finalize the rules by the end of 2019 or early 2020.

Contact your local Payroll Vault office for more information on the proposed FLSA changes and how they may affect your business.