After several years of starts and stops, the Department of Labor (DOL) released a proposal to update the overtime rules under the Fair Labor Standards Act (FLSA). As we reported earlier, the DOL— during the Obama administration — raised the minimum salary threshold for exemption from overtime to $47,476 per year. Early in the Trump administration, a federal judge declared the rule invalid, keeping the salary threshold at $23,660. While Labor Secretary Alexander Acosta agreed that the threshold should be higher, the DOL was slow to issue an alternate proposal.
The new rule, expected to take effect in January 2020, formally rescinds the 2016 rule with a proposal that:
- Requires salaried executive, professional, administrative, and computer employees to be paid at least $679 per week in order to be exempt — up from $455 per week.
- Allows non-discretionary bonuses and incentive payments to comprise up to 10% of the $679 minimum as long as they are paid at least annually. Current rules do not allow commissions and bonuses to count toward the minimum.
- Raises the total annual compensation requirement for highly compensated employees to at least $147,414 per year to qualify as exempt. Of that, at least $679 per week must be paid on a salary or fee basis.
The Department intends to propose updates to the salary levels every four years based on increases to the Consumer Price Index.
Employers should note that paying employees a certain salary does not necessarily mean they are exempt. Each of the exemption types has a corresponding minimum duties test; an employee that does not meet the minimum duties test is non-exempt and entitled to minimum wage and overtime, regardless of the method or amount of payment. More information on the rule is available at the DOL website.
Some states have laws in place that have higher minimum salary thresholds for exempt white-collar employees. Since employers must follow the law that is more beneficial to employees, the proposed federal law change would not affect employers in those states.
We will continue to keep you posted on the status of this rule. Meanwhile, we are happy to address any questions or concerns you may have.