On Sept. 24, the U.S. Department of Labor (DOL) announced its final rule to change the standard salary level threshold for exempting so-called “white collar” employees from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements.
Effective Jan. 1, 2020, the new rule raises the salary threshold from the current amount of $455 per week to $684 per week ($35,568 annualized). The categories of employees affected include those classified as executive, administrative, professional employees, and computer employees. Further, employers may use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level. Additionally, the new rule raises the minimum salary threshold for exempt employees classified as “highly compensated” from $100,000 to $107,432.
Legal challenges are expected from the same worker advocacy groups that tried to persuade the DOL to mirror the Obama-era administrative regulation which would have increased the annual salary level threshold to $47,476. That regulation was blocked by a federal court in Texas in 2016.
The DOL estimates the new rule will extend overtime pay eligibility to an additional 1.2 million workers. By contrast, the rule proposed in 2016 would have affected 4.2 million employees.
This development is significant for employers. Failure to meet and—more urgently—prepare for the new requirements may expose employers to FLSA liability, including liquidated damages and attorney fees. Taft’s Employment & Labor Relations group is ready to guide your business through these looming changes.