Richardson, Whitman, Large & Badger

PROPOSED CHANGES TO THE “WHITE COLLAR” EXEMPTON RULE:
WHAT IT MEANS FOR MAINE EMPLOYERS
 
By Eric J. Uhl / March 21, 2019

On March 7, 2019, in a long-awaited move, the U.S. Department of Labor (“U.S. DOL”) issued its new Notice of Proposed Rulemaking that would increase the minimum salary requirements for the so-called “white collar” exemptions under the Fair Labor Standards Act (“FLSA”).  The white collar exemptions—applicable to certain executive, administrative, and professional employees—exempt covered employees from minimum wage and overtime requirements.  In addition, in January the Maine House of Representatives introduced legislation that would raise the current state minimum salary level for white collar employees to a higher level on January 1, 2020, with additional increases each year thereafter.

For the white collar exemption to apply, three tests must be met:  (1) under the “salary basis test,” an employee must be paid a predetermined and fixed salary each week that is not subject to reduction because of variations in the quality or quantity of work performed; (2) under the “salary level test,” the amount of salary paid must meet a minimum specified amount; and (3) under the “duties test,” the employee’s job duties must primarily involve specified executive, administrative, or professional duties as defined by the regulations.  

So, what would these new changes in the law mean for Maine employers?  Federal and state law impose different minimums for the salary level test.

Under current federal law, the minimum salary level is $455 per week ($23,660 per year).  The new proposed federal rule would increase the minimum salary level to the 20th percentile of earnings of certain full-time salaried workers in the South, the lowest-wage census region in the U.S.  As of January 2020—the projected date the new rule would go into effect—the 20th percentile would be $679 per week or $35,308 per year.  

The new proposed federal minimum salary level of $679 per week is a lot lower than the previous minimum level, established back in 2016, of $913 per week (a level that was struck down by a federal court).  However, under current (and proposed) Maine law, the minimum salary levels would be higher than under the new proposed federal rule. 

Under current Maine law, an employer must meet the minimum salary requirement by paying an employee an annual salary that exceeds 3000 times the applicable minimum wage—or the rate established by the U.S. DOL, whichever is higher.  Currently, as of January 1, 2019, the minimum salary level under Maine law is $33,000 per year (3000 x $11), or $634.62 per week.  As of January 1, 2020 (when the new federal rule would go into effect), the minimum salary level under Maine law will be $36,000 (3000 x $12), or $692.31 per week—which would be higher than the new proposed federal rate.  Furthermore, the Maine minimum wage (and therefore the minimum salary level) will continue to increase each January 1st by the increase in the cost of living as measured by Consumer Price Index for the Northeast Region.  

Under the new proposed Maine law, the current minimum salary level of $33,000 would increase to higher levels each year as follows:  on January 1, 2020, the rate would be $40,408 ($777.08 per week); on January 1, 2021, the rate would be $47,816 ($919.54 per week); and on January 1, 2022, the rate would be $55,224 ($1062.00 per week).  Then, on January 1, 2023, and each year thereafter, the rate would continue to increase based on statistics for full-time workers as published by the U.S. DOL.  Obviously, this proposed legislation would impose a substantial increase to minimum salary levels for Maine employers.

Please contact us for more information on how you should pay salaried employees to comply with both federal and state requirements, or if you have questions about making sure that your exempt employees meet the applicable salary level test, the salary basis test, and the duties test.    

 
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