On September 24, 2019, the U.S. Department of Labor (DOL) announced the publication of the final rule updating the minimum salary threshold necessary to exempt executive, administrative, and professional employees from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements. The final rule, which will become effective January 1, 2020, raises the standard salary level for exemption from the current $455 per week to $684 per week (equivalent to $35,568 annually). According to the DOL announcement, the increased salary level will make 1.3 million workers newly eligible for overtime compensation.
The current salary minimum has been in effect since 2004. In 2016, under the Obama administration, the DOL issued a final rule to raise the salary level to $47,476, but that rule was enjoined and invalidated by court action. The newly announced salary level falls squarely in the middle of the current standard and the invalidated 2016 rule.
In addition to the increase in the standard salary level, the new rule raises the total annual compensation level for “highly compensated employees” from $100,000 to $107,432 per year. In an effort to account for the fact that many exempt employees receive compensation in forms other than base salary, the new final rule allows employers to count nondiscretionary bonuses and certain incentive payments, such as commissions, to satisfy up to 10 percent of the standard salary level. More information about the final rule, including a fact sheet and frequently asked questions, is available here on the DOL website.
The new final rule makes no changes to the FLSA duties test, which also must be satisfied in order for an employer to properly classify an employee as exempt. Prior to the end of the year, all employers should evaluate their employee classifications for compliance with the FLSA final rule. Sirote attorneys Kyle T. Smith, Gaile Pugh Gratton, Franklin Corley, and Julian Motes are available to help with questions about the FLSA and the new final rule.