On August 30, 2023, the U.S. Department of Labor (“DOL”) announced issuance of a Notice of Proposed Rulemaking (“NPRM”) to update and revise the regulation issued under section 13(a)(1) of the Fair Labor Standards Act (“FLSA”) implementing the exemption for minimum wage and overtime pay requirements for executive, administrative, professional, outside sales, and computer employees. The NPRM includes:

1. a substantial increase to:
   1. the minimum salary level to qualify as an exempt employee, which is expected to be at
      least $1,059 per week and $55,068 annually;
   2. the highly compensated employee annual compensation threshold to $143,988;
2. the implementation of an automatic update mechanism to assure efficiency maintaining
   updated all earnings thresholds every three years based on data available at that time.

NPRM applicability to U.S. territories including Puerto Rico

The DOL is also proposing that said increase should apply in the U.S Territories, including Puerto Rico, which has not increased for almost two decades. As you may recall, in the 2019 revision, the DOL elected to preserve the salary level set in 2004 (i.e. $455 per week) for Puerto Rico, Guam, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands. Nonetheless, in the interest of applying the FLSA uniformly to areas subject to the federal minimum wage, the DOL is now proposing to apply the standard salary level to employees in all territories that are subject to the federal minimum wage and to maintain a special salary level only for employees in American Samoa, because that territory remains subject to special minimum wage rates. The DOL is also proposing to update the special base rate for employees in the motion picture industry to $1,617 per week (or a proportionate amount based on the number of days worked).

However, at this juncture the NPRM is still in the early stage of public comment submissions which means that the proposed rule is subject to change. Furthermore, considering our current state of affairs, we will continue to monitor the development of the NPRM because there is a possibility that the Financial Oversight and Management Board will recommend the exclusion of Puerto Rico from the final rule, consistent with the considerations that motivated the adoption of PROMESA, as it has occurred in the past. Accordingly, it is important for employers to be aware of new developments regarding the approval and the implementation of the NPRM to ensure compliance with legal obligations under the FLSA and the applicable regulations.

If you have any questions or comments regarding these recent developments that impact the employment landscape or if you’d like assistance to revise or modify your practices and policies to ensure compliance with local legislation, please contact any of the following attorneys from our Labor & Employment Practice Group at your convenience: