The Department of Labor (“DOL”) has proposed a new rule that would increase the salary threshold for most “white collar” exemptions under the Fair Labor Standards Act (“FLSA”) from $23,600 per year ($455 per week) to $35,308 per year ($679 per week). If adopted, as expected, the rule would go into effect on January 1, 2020.

Many hospitality employers employ “white collar” exempt employees who earn more than $23,600 but less than $35,308 per year, and they will face the important and challenging decision of whether to increase some employees’ salaries or convert them to non-exempt status. This decision will directly impact not only employees but also employers’ budgets and compensation structures. Employers should act now to plan ahead for the adoption of the new rule:

1. Identify employees currently treated as FLSA exempt who are paid less than $35,308 per year, as those are the persons for whom this decision will need to be made.

2. Confirm that each employee meets the “duties test” for the exemption, as that would not change under the new rule.

3. Decide whether to increase each identified employee’s salary to the $35,308 threshold or to convert the employee to non-exempt.

4. If converting an employee from exempt to non-exempt, determine what the employee’s new hourly rate will be.

5. Prepare to implement changes by January 1, 2020, including coordination with the payroll department or vendor.