The Department of Labor (DOL) released a Notice of Proposed Rulemaking that would increase the minimum weekly salary required to qualify for a white-collar overtime exemption by more than 50 percent, to $55,000.

If the changes go into effect, the DOL estimates that 3.65 million workers will be newly eligible for overtime.

Increasing the white-collar thresholds

The white-collar overtime exemption is a set of rules that determine whether certain employees are eligible for overtime pay. To be exempt from overtime pay, an employee must meet specific criteria, including 1) exempt duties, 2) a fixed salary, and 3) a salary threshold.

To qualify for the exemption, the employee’s job duties must be administrative, professional, or executive in nature. That means the employee is supervising others, doing office work, or doing work that requires advanced knowledge in a specialized field.

Exempt employees generally receive a fixed salary regardless of the number of hours they work. Employees must also earn at least a minimum salary to qualify for the exemption. To that end, the DOL has proposed the following:

Increase the salary threshold from $684 per week ($35,568 per year) to $1,059 per week ($55,068 per year) to be exempt from overtime.
Raise the salary threshold for highly compensated employees (HCEs) from $107,432 to $143,988 per year. While HCE duties can vary more widely, these employees are generally exempt from overtime pay if they meet this threshold and regularly perform at least one of the exempt roles outlined above.
Automatically updating these earnings thresholds for inflation every three years.

What should employers do?

Be aware that even if the increases are enacted, the rule is likely to face legal obstacles.

In 2016, the DOL attempted to increase the threshold to $47,476 and implement an automatic-update mechanism. Both of those efforts were invalidated by a federal district court. At that time, the court’s opinion was that the threshold was too high, and the automatic update mechanism was unlawful.

Nevertheless, as inflation has increased and political winds have changed, the new proposal may survive challenge.

Employers should start planning now for the possibility that the DOL’s proposal will be adopted:

Audit your exempt job classifications to see which employees would be affected by the new salary threshold.
Prepare to raise salaries, reclassify employees to nonexempt status, or redistribute workload to reduce the need for overtime. Be aware that employees who are reclassified to nonexempt will need to comply with timekeeping requirements under the Fair Labor Standards Act. That may require new systems or training.

Although no changes have been proposed to the duties tests, employers may also want to revisit job responsibilities to ensure alignment with the exemptions. Regular reviews are advisable as employee roles evolve over time and the consequences of misclassification can be significant.