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Employment Law

Exempt or Not-Exempt: That is the Question and the Answers are Changing

department of laborThe Department of Labor (DOL) is proposing changes to the federal regulations that deal with overtime pay, particularly regarding exempt and non exempt employees.

An exempt employee (who must be primarily an executive, administrative or professional employee) is not entitled to overtime pay, while non-exempt employees are entitled to time and a half wages when their workweek exceeds 40 hours.

Specifically, the DOL is expected to raise the minimum  salary of an exempt employee to $50,000 annual salary. The exact figure will be tied to the DOL’s Bureau of Labor Statistics for the 40th percentile of earnings among full-time salaried workers. This will eliminate many previous workers whose employers benefited by classifying them as exempt from employees.

In addition, the DOL is also proposing to increase the compensation level litmus test of exemption for what is termed highly compensated employees. Currently, that annual salary is around $100,000 annually. It is slated to rise around 20%. This figure is tied to the 90th percentile of earnings of full-time salaried workers.

The DOL is also proposing that these exemption levels have a mechanism for annual changes, analogous to a cost of living adjustment, but tied to the Bureau of Labor Statistics salary data.

Employers and employees would be well-advised to carefully monitor these proposed changes. Employers will need to be vigilant if the salary change makes a current exempt employee non-exempt and therefore eligible for overtime pay. Employees may want to decide against a future pay raise if it places them in the exempt category, thereby eliminating overtime earnings.

We urge all who may be affected by those regulations to contact an attorney who specializes in employment law for clarification and counsel.