For the first time since 2004, the Department of Labor (DOL) has adjusted the minimum salary thresholds for various overtime exemptions. Employers should mark their calendars because starting January 1, 2020, the salary thresholds for an “exempt” employee under the Fair Labor Standards Act (FLSA) will increase. If current exempt employees do not meet the new minimum salaries, then employers must start paying overtime or adjust salaries accordingly.
The new rule increases the minimum salary threshold for exempt employees, which in turn makes more employees eligible for overtime pay.
Increase to Salary Thresholds for “Exempt” Employees
Exempt employees are not eligible for overtime pay. Conversely, nonexempt employees must be paid time and a half for any hours worked over 40 in a workweek. The new rule increases the minimum salary threshold for exempt employees, which in turn makes more employees eligible for overtime pay.
The new minimum salary thresholds for the executive, administrative, professional, and computer employee exemptions will rise from $455 per week ($23,660 annually) to $684 per week ($35,568 annually). Additionally, the “highly compensated employee” exemption minimum salary threshold will rise from $100,000 annually to $107,432 annually.
To reach the new thresholds, the DOL will include payments comprised of nondiscretionary bonuses or incentive payments (including commissions), up to 10% of an employee’s salary, when determining if an employee met the salary threshold. Any amounts paid over 10% will not count towards the minimum salary threshold, but if an employee (1) did not earn enough in nondiscretionary bonuses or incentives at the at the end of the year to meet the threshold and (2) had received nondiscretionary bonuses or incentives in an amount less than 10% of his or her salary, then an employer may make a “catch-up” payment to reach the threshold, as long as the payment is made within one pay period of the year’s end.
The new rules only affect the minimum salary thresholds for exempt employees and how that pay may be obtained, and do not affect various job duties requirements which employees must also meet to be exempt from overtime. Both the job duties requirements and the salary thresholds must be met to maintain exempt status.
Employers should immediately review employee classifications to determine whether or not exempt employee salaries will meet minimum standards once the new rules take effect. Employers should also take this opportunity to ensure that employees who are classified as exempt qualify under the job duties tests for their exemption. If employees are no longer exempt, employers will need to begin paying them overtime as of January 1, 2020 or adjust salaries to meet the new salary threshold, if the employee qualifies under the job duties test.
This information has been prepared by Tydings for informational purposes only and does not constitute legal advice.