On Thursday March 7, 2019, the United States Department of Labor (“U.S. DOL”) proposed a new “overtime rule,” which would raise the minimum salary level for employees under the Fair Labor Standards Act’s “white collar” exemptions. The white collar exemptions include the most frequently utilized overtime exemptions, including the “executive,” “administrative,” and “professional” exemptions. The proposed overtime rule would raise the minimum salary threshold to $35,308 per year for employees under the white collar exemptions, or roughly $679 per week. The U.S. DOL’s current minimum threshold of $23,660 was adopted in 2004.

The proposed rule will be subject to comment for 60 days following formal publication in the Federal Register. In a statement, the U.S. DOL projected that the proposed rule would take effect in January 2020.

New York DOL’s Minimum Salary Thresholds Still Higher Than Proposed U.S. DOL Thresholds

For employers in New York state, however, the proposed overtime rule will most likely not require sweeping payroll changes for executive, administrative, and professional employees. New York’s Department of Labor (“N.Y. DOL”) maintains its own minimum salary thresholds for white collar employees under the New York State Labor Law. The precise salary thresholds vary based upon an employer’s geographic location within the state. In all cases, however, New York’s minimum salary thresholds for the white collar exemptions are still higher than the U.S. Department of Labor’s proposed minimum thresholds in the new overtime rule. This means that an employee who meets the minimum salary threshold under N.Y. DOL regulations would most likely satisfy the minimum salary threshold under the U.S. DOL’s newly proposed overtime rule. The minimum salary thresholds for white collar employees under New York law in 2019 are set below. Note that New York’s regulations require a minimum salary per week:

Many employers will remember that the U.S. Department of Labor was set to implement an overtime rule in 2016. That rule would have raised the minimum salary threshold for the white collar exemptions to $47,000 annually. As employers prepared for the rule’s implementation, however, a Federal court in Texas issued a permanent injunction blocking the rule just days before it was set to take effect. The U.S. DOL’s minimum salary thresholds have remained at 2004 levels—$23,660—since that injunction. The U.S. DOL reached the proposed rule’s new threshold of $35,308 after soliciting public comment over the last year. In a statement, the U.S. DOL stated that the public “overwhelmingly agreed” that the minimum threshold levels for white collar exemptions needed to be increased.

Notably, the new overtime rule does not modify the “duties” tests for white collar exemptions. Apart from meeting a minimum salary, employees under the executive, administrative, or professional exemptions must perform specific “exempt” duties, usually consisting of office work and/or work requiring independent judgment. These “duties” tests for the white collar exemptions would remain unchanged under the proposed overtime rule.

Employers in New York State Should Note Increased Minimum Salary Threshold for “Highly Compensated Employee” Exemption

Along with increasing the minimum salary threshold for the traditional white collar exemptions (executive, administrative, and professional employees), the U.S. DOL’s proposed overtime rule also increases the minimum salary level for employees in the “Highly Compensated” exemption. Under the current “Highly Compensated” exemption, certain employees may be exempt even if they do not fully satisfy the white collar “duties tests,” as long as they earn at least $100,000 annually. The proposed overtime rule increases the minimum salary threshold for employees under the Highly Compensated exemption to $134,000.

Unlike the federal Fair Labor Standards Act, the state’s labor law does not contain a specific exemption for “Highly Compensated” employees. Accordingly, New York employers with employees in the Highly Compensated exemption should closely monitor the proposed rule’s implementation of the new $134,000 threshold.

This alert does not purport to be a substitute for advice of counsel on specific matters.

Harris Beach has offices throughout New York State, including Albany, Buffalo, Ithaca, Melville, New York City, Rochester, Saratoga Springs, Syracuse, Uniondale and White Plains, as well as New Haven, Connecticut and Newark, New Jersey.