U.S. Department of Labor Issues Final Rule
Increasing Salary Threshold for Exempt Employees
Six months after seeking public comment on proposed changes to the earnings threshold for workers to qualify for an exemption to overtime under the Fair Labor Standards Act – and more than three years after issuing a similar “final” rule that was invalidated in court – the United States Department of Labor (“DOL”) has issued its final rule raising the overtime standard salary level, among other changes.
The key points of the final rule – effective January 1, 2020 – are:
In order for employees to be exempt from overtime under the “executive, administrative or professional” exemptions, the salary threshold will now be $35,568 per year ($684 per week), raised from $23,660 per year ($455 per week). Employers will still have to demonstrate that such employees meet applicable duties tests, which have not been changed for these exemptions.
The total annual compensation requirement for the “highly-compensated employee” exemption is increased from $100,000 to $107,432 per year.
Employers may count up to ten percent of certain nondiscretionary bonuses and incentive payments (including commissions) which are paid at least annually in calculating salary levels. The DOL has explained in its FAQs that these bonuses include those tied to productivity or profitability. Employers are permitted to make a “catch-up” payment in the event an employee does not earn enough in such bonuses and incentives in a given year to remain exempt.
The special salary levels for workers in the U.S. territories and in the motion picture industry are increased.
Is it important to check local salary thresholds when reviewing exempt classifications because some jurisdictions (like New York) have thresholds that are higher than these federal standards.
More information about the final rule can be found on the DOL’s website, which can be accessed HERE .