September 1, 2023
NOTICE TO CLIENTS AND FRIENDS
DOL Proposes New Rules for “White Collar” Overtime Exemptions
On August 30, 2023, the U.S. Department of Labor (DOL) released a Notice of Proposed Rulemaking that would significantly raise the salary thresholds to qualify for one of the three “white collar” exemptions under the Fair Labor Standards Act (FLSA). If the proposed changes go into effect, they will likely have a significant impact on how employers pay their employees and who is or is not entitled to overtime pay.
The FLSA guarantees a minimum wage for all hours worked and limits to 40 hours per week the number of hours an employee can work without additional compensation. Section 13(a)(1) of the FLSA exempts from these wage and overtime pay protections “any employee employed in a bona fide executive, administrative, or professional capacity.” To be eligible for exempt status, an employee must satisfy certain requirements related to his primary job duties and, in most cases, must be paid on a salary basis at not less than the minimum amounts prescribed in DOL regulations. The DOL’s proposed rule does not purport to alter the FLSA’s duties test; it is only concerned with the salary basis test for exempt employees.
Specifically, the DOL proposes raising the weekly salary by over 50 percent from $684 per week to $1,059 per week (which is equivalent to an annual salary of $55,068). The DOL also seeks to increase the salary threshold for the “highly compensated employee” exemption from $107,432 per year to $143,899 per year. Finally, the DOL proposes automatically updating these salary thresholds every three years. The proposed rule will be open for public comment for 60 days, expiring on October 29, 2023.
The DOL’s proposed rule would apply across the United States and to certain United States territories, including Puerto Rico, where the salary threshold for executive, administrative and professional workers stands at $455 per week as of 2004. Given Congress’s apprehension with increasing the salary level in Puerto Rico, as specified in Section 404 of the Puerto Rico Oversight, Management, and Economic Stability Act, it is possible that the DOL will continue applying the current salary level in lieu of any final regulations related to the DOL’s proposed rule, mirroring the events following the DOL’s adoption of a similar overtime final rule in 2016. At any rate, employers in Puerto Rico would be well served to keep abreast of future developments in the DOL’s rulemaking process prior to implementing any meaningful changes to existing policies, procedures, and practices.
SMC attorneys are closely monitoring updates and changes to Puerto Rico’s legal landscape and are readily available to assist employers in amending and revising their human resources policies to ensure compliance with Federal and Puerto Rico labor and employment laws and regulations.