DOL Proposes to Increase the Salary Threshold for White Collar Workers

On August 30, 2023, the Department of Labor (DOL) made a significant announcement by issuing a Notice of Proposed Rulemaking (NPRM) titled "Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees." The heart of this proposal is the DOL's plan to elevate the minimum salary threshold for exempt workers under the Fair Labor Standards Act (FLSA) from its current rate of $684 a week ($35,568 a year) to $1,059 per week (equivalent to approximately $55,000 annually). These changes target the "white-collar" exemptions, including executive, administrative, professional, outside sales, and computer employees. To qualify for these exemptions, employees must meet specific criteria, including earning a minimum salary.

This proposed rule change aims to extend overtime protections to a broader group of workers, potentially benefiting millions previously exempted from these protections. According to estimates by the DOL, approximately 3.6 million salaried workers will be affected by this increase in the salary threshold. The threshold for the highly compensated employee exemption will also experience an elevation to $143,988.

This federal change won't affect California employers directly, as California law already mandates a higher minimum salary for exempt employees, currently set at $64,480 for 2023.

The proposal is currently in a 60-day comment period, after which it's expected to become law. This would be a good time for employers to assess their exempt employee population. Employers should determine whether their exempt employees will meet the new minimum standard and, if not, decide whether to increase their salaries or reclassify them as non-exempt employees.