DOL Regulation to Watch: Federal Minimum Salary Threshold for Classifying Exempt Employees

As President Biden’s Department of Labor (DOL) nominees continue to move through the Senate confirmation process and publicly respond to member inquiries about their preferred priorities, we are starting to get a clearer picture of potential future labor policy changes that could be coming down the pike.

As early as this fall, we expect the Department of Labor to initiate a formal rulemaking process about raising to the federal minimum salary threshold used to classify an employee as exempt from overtime pay. In addition to increasing this federal minimum salary threshold, any proposed rule would likely include language about regular and automatic updates to this minimum salary threshold, a model used by some states and localities who have their own minimum salary thresholds. This week, the 4As Alison Pepper and agencies Dentsu and Connelly Partners weighed in on the topic with Ad Age.

This automatic salary threshold adjustment approach differs from the current adjustment process in that currently DOL must initiate a new formal rulemaking each time it wants to adjust the federal minimum salary threshold. DOL Secretary Marty Walsh told members of Congress at a June 9 hearing that the existing salary threshold is “definitely too low” and that these automatic adjustments are likely necessary.

With so many agencies experiencing staffing shortages and difficulties hiring new, affordable talent, increasing the federal minimum salary threshold could trigger increased overtime requirements for a larger swath of junior level talent, particularly in lower-cost markets. This could negatively impact the predictability of labor expenses and project budgeting for agencies.