Secretary of Labor to Congress: The salary level cutoff for overtime is too low. We’re changing it.

I still get a kick out of people using the term “salary exempt,” as in, we pay that employee a salary, so s/he isn’t eligible for overtime. Under the Fair Labor Standard Act, a salary is just one of several components of an overtime exemption to avoid having to pay employees time and a half when they work more than 40 hours in a workweek. Plus, the salary must be at least $684 per week, equating to $35,568 per year.

Except, that could be increasing significantly soon.

Max Kutner at Law 360 (here) and Benn Penn at Bloomberg Law (here) have reported that Secretary of Labor Marty Walsh testified before Congress last week that he intends to revisit the minimum salary level required for an employee to be considered exempt. Here’s more from Mr. Penn’s article:

The department is reviewing whether to update the salary threshold below which workers are eligible for overtime pay, Walsh said. The current annual overtime eligibility salary cutoff, of about $36,000, is “definitely” too low, he told the panel.

“Do you have any plans to revisit this issue and re-regulate in this area?” Rep. Mark Takano (D-Calif.) asked Walsh.

”We’re currently right now doing that, reviewing that regulation,” he responded. “Literally, as we speak, we have people at the Department of Labor working on that.”

Back in 2016, the Obama DOL tried unsuccessfully to raise the salary level to $47,476 ($913/week). It proposed a final rule only to have a Texas federal judge stop it with a nationwide injunction.

Presumably, if Mr. Walsh spearheads a similar effort to change the salary level, he’ll meet the same business-led resistance that the Obama DOL faced in 2016. Plus, there’s talk that the DOL may change the rule to automatically increase the salary level from time to time. You won’t find automatic escalators anywhere in the FLSA. So, expect opponents to have a field day with that too.

Meanwhile, like Pennsylvania, some states have successfully revised their overtime rules — salary levels, specifically — to be more generous than federal law. So, for those of you operating in those states, stay on top of any wage and hour law changes. Mistakes can be costly.

Class action expensive.

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