The U.S. Department of Labor (DOL) finally issued the overtime regulations, updating the salary thresholds for the white-collar exemptions, including executive, administrative, professional exemptions, and the highly compensated employee exemption under the Fair Labor Standards Act (FLSA).
As you may recall, the DOL originally tried to increase the salary threshold under the Obama administration, increasing the threshold for white-collar exemptions to $913 per week ($47,476 annually), and $134,004 annually for highly compensated employees. These rules were blocked by a federal judge before they were implemented.
The new rules, which go into effect on January 1, 2020, increase the white-collar exemption from $455 per week ($23,660 annually) to $684 per week ($35,568 annually). The threshold for highly compensated employees goes from $100,000 to $107,432 annually. The new rule allows employers to use non-discretionary bonuses and incentive payments, paid at least annually, to satisfy up to 10% of the salary threshold. Employers may also make “catch up” to employees who are underpaid, so long as the payment is made within one payday of the end of the 52-week period. Finally, the new rules fully rescind the 2016 draft rules.
Take away: These rules are less controversial than the 2016 version and employers should review those positions which utilize the exemptions and consider whether:
- the position is properly classified,
- the salary levels still qualify for the exemption, and
- consider alternative compensation methods if you no longer fall within the exemption.
As always, if you have employment law questions, we recommend you contact an experienced employment law attorney.