Seyfarth Synopsis: On December 10, 2021, the White House and U.S. Department of Labor confirmed their plan to propose new rules to increase the salary threshold for exempt employees under the FLSA and “modernize” the prevailing wage rules that apply to many federal government contractors and subcontractors. The rulemaking process will be a relevant focus for virtually all employers in 2022.
The announcement comes by way of the Biden-Harris Administration's semi-annual agenda, which lists regulatory actions under “active consideration” by the USDOL for the coming year. Such actions, the Administration explained, are meant to “advance our mission to foster, promote and develop the welfare of the wage earners, job seekers and retirees….”
As reflected in the agenda, the new overtime rule would increase the salary level requirement for overtime-exempt employees under Section 13(a)(1) of the FLSA. Increase to what? It's not clear yet, but it'll be something more than $684 per week, which is the current threshold for salaried-exempt administrative, executive, and professional employees.
Based on the agenda, we also expect modifications to the “highly compensated employee” exemption, which is currently available for employees who satisfy a relaxed duties test and earn at least $107,432 in annual compensation, inclusive of the minimum weekly salary of $684.
While clearly impactful, these developments are not surprising. This summer, USDOL Secretary Marty Walsh told a Congressional committee that the current salary threshold is “definitely” too low. And much further back, when President Biden was Vice President Biden, the DOL rolled out an even higher (and automatically increasing) threshold, though that rule was ultimately invalidated by a federal court in Texas before it took effect.
The DOL, per its regulatory agenda, also intends to “update and modernize the regulations implementing the Davis-Bacon and Related Acts to provide greater clarity and enhance their usefulness in the modern economy.” It is unclear what changes the DOL has in store for these laws, which generally require contractors and subcontractors performing on federally funded or assisted contracts in excess of $2,000 (for the construction, alteration, or repair of public buildings or public works to pay laborers and mechanics) no less than a local prevailing wage that the USDOL sets.
So what happens next? The USDOL still needs to propose new rules, provide an opportunity for notice and comment, and ultimately publish a final rule. That process could easily take 9 months or more. Employers should continue to follow the current rules until they are changed. Beyond that, however, now may be a good time for employers to consider whether the new rules provide a good opportunity to audit “close call” jobs in their exempt workforce to ensure they remain properly classified (and, if need be, to sync any necessary changes with the implementation of a new rule).
Additionally, employers should remain attuned to the regulatory process. The notice-and-comment period will provide an opportunity for interested employers and their advocates to communicate with the DOL about the impact of the DOL's proposals, a process that Seyfarth has been involved with in numerous prior DOL rulemakings.
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