Navigating change: A guide for employers on the proposed minimum salary threshold increase

The U.S. Department of Labor (DOL) recently unveiled a significant proposal that could reshape the landscape of employee compensation. In its Notice of Proposed Rulemaking, the DOL aims to boost the minimum salary requirement for overtime exempt of executive, administrative, and professional workers under the Fair Labor Standards Act (FLSA) by over 50%.

The current salary threshold for exempt white collar employees is set at $684 per week ($35,568 per year). The proposed rule seeks to elevate that level substantially to $1,059 per week ($55,068 per year). Such a modification could have far-reaching implications for employers and employees across various industries.

A public comment period on the proposed rule closed on November 7, 2023. During this period, the DOL received over 33,000 submissions with concerns, insights, and suggestions regarding the proposed changes. The DOL will now review and consider these comments as it prepares to issue a final rule.

While the DOL may make some minor adjustments to the proposed rule, employers should anticipate that in the coming months the DOL will issue a final rule with a salary level increase. In response to this development, here are proactive steps employers can take to begin to prepare for the salary level adjustment:

• Review current salary structures: Conduct a thorough assessment of existing salary structures to identify employees whose salaries may fall below the proposed threshold. This review should encompass both exempt and non-exempt positions.
• Impact analysis: Perform a comprehensive analysis of the financial impact of the potential salary threshold increase on the organization. This includes evaluating budgetary constraints and planning for necessary adjustments.
• Salary adjustment planning: Consider how to address salary compensation that falls below proposed threshold and consider if any positions should be converted to hourly roles. Develop a plan for adjusting salaries, exploring options such as salary increases, reclassification of positions, or changes in work hours.

Employers will also want to consider future compliance measures, training, and key employee communications once the DOL announces the final rule and an effective date.

• Communication strategy: Develop a clear and transparent communication strategy to inform employees about impending changes.
• Compliance check: Ensure all employment policies and practices align with the updated regulations. This includes carefully reviewing job classifications, overtime policies, and exemption status.
• Training and education: Train HR staff, managers, and employees on the potential regulatory changes and any adjustments in policies or procedures. This proactive education will facilitate a smoother transition and reduce the risk of compliance issues.
• Legal consultation: Seek legal advice to ensure full compliance with the potential new regulations. Consulting with employment law experts can help navigate the complexities of these changes and mitigate legal risks.
• Implementation timeline: Establish a realistic timeline for notifying employees and implementing any necessary salary adjustments.
• Monitor for additional changes: Stay vigilant and informed about any additional updates, change, or guidance from the DOL.
• Record keeping: Maintain accurate records of salary adjustments, policy changes, and communication with employees. This meticulous documentation will be crucial for audits and compliance verification.

By planning ahead, employers can navigate the potential changes to the new salary threshold, promote compliance, and maintain positive relationships with their workforce.

The McDonald Hopkins Labor & Employment team is experienced in assisting employers address challenging workplace transitions. Please reach out to your MH employment attorney with questions or for assistance.