Ask The Lawyer By: Daniel A. Gwinn, Esq. – Wage Raise for Salaried Workers?



QUESTION: I read an article online that said employers have to start paying their salaried workers more. I’m an employer so I’m concerned about this. It seems like we had to give everyone a salary bump just a few years ago. How much more do we have to pay them now?

ANSWER: If you feel like you’ve been down this road before, it’s because you have. The minimum amount salaried workers must receive in order to be exempt from overtime has been a bone of contention over three administrations.

Under the Fair Labor Standards Act (FLSA), which applies to employees of businesses that have gross receipts/sales of at least $500,000, hourly workers (also called “non-exempt” workers) must be paid time-and-a-half overtime for all hours after the first 40 worked in one week. But the law allows some workers — executive, administrative, professional, computer and outside sales employees — to be exempt from the overtime pay requirement. Workers who fall into one of these categories can be paid a salary, receiving a set amount regardless of “variations in the quantity or quantity of the employee’s work.” Under the current rule, issued in 2019 by the Department of Labor during the Trump administration, salaried workers must be paid at least $679 per week ($35,308 per year) to qualify for the overtime exemption.

The current rule is a step back from a rule issued during the Obama administration. That rule, issued in 2016, would have raised the minimum salary requirement to $47,500 per year, or roughly $913 per week (a huge jump from the prior level of $23,660 per year, or $455 per week).

But, in November 2016, shortly before the new rule was scheduled to go into effect, a judge for the federal court in Texas ruled it was unlawful and granted a nationwide injunction. That same month, Americans elected Donald J. Trump as president; the new administration had no interest in appealing the Texas court’s ruling. In 2019 it issued its own rule, raising the minimum salary required to its current rate. And that was that — until now.

On August 30, the DOL under President Joe Biden announced a proposal to raise the minimum salary necessary for a worker to be exempt from overtime to $55,086 per year, or about $1,059 per week. If the proposal becomes final, employers will have some decisions to make. Should they raise salaries for exempt employees to the new minimum, or keep pay levels where they are and start paying overtime?

Employers should have some time to figure this out. The DOL will accept public comment for at least 60 days before issuing its final rule. If that happens, a legal challenge is likely.

Given this uncertainty, what should you do now? This is a good time to review how you classify workers and determine if everyone classified as exempt really meets FLSA criteria. You should also review the average hours worked by exempt employees to decide — now or later — whether paying them on salary or hourly is the most cost-effective for your business.

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By: Daniel A. Gwinn, Esq.
Attorney and Counselor at Law
900 Wilshire Drive, Suite 104
Troy, MI 48084
(248) 970-0310
(248) 970-0311 facsimile
[email protected]