Parsing The Impact Of White Collar FLSA Exemption Proposal

The salary threshold for the white-collar Fair Labor Standards Act overtime exemption is $684 per week or $35,568 per year.

Employees earning less than $684 per week must be paid an overtime premium of time and a half for hours exceeding 40 hours in a week, regardless of their job duties.

The Congressional Progressive Caucus recently proposed an increase in the salary threshold that they claim will reach $82,732 by 2026 — $1,591 per week. The CPC proposal states that "automatic updates to prevent the erosion of the salary threshold over time" should be implemented.[1]

This article shows that if the CPC proposal were implemented today, the salary threshold would be $1,500 per week or 119% higher than the current threshold. In addition, the automatic updates proposed by the CPC would cause substantially faster growth in the threshold by 2026 than the 6% increase assumed by the CPC.[2]

The proposed salary threshold increase would cause the reclassification of millions of managers and professionals as hourly employees, especially in low-wage states, and require nearly all retail supervisors to be classified as nonexempt.

Businesses required to accurately record the work hours and accurately calculate regular rates of millions of managers and professionals, many of whom receive bonuses and commissions, are likely to face a considerable increase in compliance costs.

Economic theory suggests that the proposed increase in the salary threshold is questionable public policy because, despite the costs, it is not expected to increase the average compensation of reclassified workers but will likely increase the variability of their compensation from week to week.