DOL Releases Final Rule to Increase the Salary Threshold for FLSA Overtime Exemptions
September 26, 2019
Earlier this week, the Department of Labor (“DOL”) released its much-anticipated final rule setting a new minimum salary threshold for the Fair Labor Standards Act’s (“FLSA”) white-collar exemptions. Anticipated to take effect January 1, 2020, the final rule increases the minimum salary threshold to $684 per week or the equivalent of $35,568 per year. Additionally, the final rule increases the minimum salary threshold for “highly compensated employees” from $100,000 to $107,432 per year.
In addition to increasing the minimum salary threshold, the final rule allows employers to use incentive payments – including commissions and certain non-discretionary annual bonuses – to account for up to 10% of the employee’s salary level. Importantly, the final rule does not make any changes to the primary job duties test, nor does it provide for the mandatory periodic increases to the minimum salary threshold which were included as part of the prior rule ultimately stopped by the courts. Nonetheless, employers should expect more frequent reviews of this minimum salary threshold going forward.
As a refresher, the federal overtime provisions of the FLSA require that employers must provide overtime pay for hours worked over 40 in a workweek unless an overtime exemption applies. For an exemption to apply, an employee’s primary job duties and salary must meet certain minimum requirements. Since 2004, the minimum salary for the so-called “white-collar exemptions” – some of the most commonly used exemptions – has been $455 per week or the equivalent of $23,660 per year.
There still remains a possibility that this final rule will be challenged in the courts, so we will keep you posted regarding any developments.
If you have any questions about this ALERT or would like to discuss reviewing your pay policies to ensure compliance, please contact a member of the Shulman Rogers Employment and Labor Law Group or the Shulman Rogers attorney with whom you regularly work.