“The further a society drifts from truth, the more it will hate those who speak it.”

--George Orwell

The Fair Labor Standards Act (“FLSA” or “Act”) specifies minimum wage and overtime requirements for covered employees. The Act provide for exceptions to the same as “defined and delimited” by the U.S. Department of Labor (“DOL”). To implement the executive, administrative and professional exemptions, as well as the computer employee exemption, DOL has long specified a salary basis test. The current salary basis test which was set in 2020 is a salary of $684 a week or $35,568 a year. This salary requirements does not apply to outside sales employees, teachers, and practicing lawyers, or doctors. Exempt computer employees may be paid at least $684 on a salary basis or on an hourly basis at a rate not less than $27.63 an hour.

Being paid on a “salary basis” means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee’s work.

DOL has now proposed new regulations raising the salary basis test.  DOL’s proposal would raise the salary threshold level for exempt workers under the FLSA to $1,059 per week ($55,068 annually) from its current rate of $684 per week ($35,568 a year). DOL has furtherer proposed  to apply the standard salary level to Puerto Rico, Guam, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands, and to increase the special salary levels for American Samoa and the motion picture industry. And DOL has proposed to increase the highly compensated employee total annual compensation requirement to the annualized weekly earnings of the 85th percentile of full-time salaried workers nationally, which would be $143,988 per year based on current data. Finally, DOL has proposed to automatically update the earnings threshold every three years with new wage data.

There is also another  proposed salary basis regulation rule issued by the Biden Administration in May 2022 which has never been finalized.

Now I will depart from the facts and entered into the realm of opinion. You don’t have to agree with me and many employers, particularly small businesses and in rural areas of the country, do not agree. But my view is if we are going to have a national minimum wage and overtime rules, and a national exemption, the exemption need to be drawn a level that makes economic sense. The current salary basis levels are just too low. It doesn’t make sense for workers to get overtime compensation and end up being paid significantly more than the supervisors who manage them. It upsets the expectations of the managers and discourages workers to seek promotions.  It also just doesn’t make economic sense to call a worker who earn $35,568 a year an executive. That just isn’t very probable.  Accordingly, I put my thumb down on the scale in favor of the new salary bass levels and the automatic update provision. I think they are warranted now and reasonable. I think a requirement to earn at least $55,068 a year is a decent threshold to set for an exemption from premium overtime pay. I recognize that it will cause some hardship to small employers and employers in rural America, but that is the price we pay for national standards.  

I also recognize that there was a Texas case which came out as as a result of some Obama Administration rulemaking suggesting DOL didn’t have the authority to raise the salary basis test. The Trump Administration mooted and dropped any challenge to that aberrant ruling. I never understood the logic or rationale for that decision. Indeed, I thought it was garbage. The rights given by Congress to DOL here are clearly plenary. The courts have no power to meddle with this kind of regulation, at least in my judgment.