On September 24, 2019, the U.S. Department of Labor (“DOL”) announced a final rule increasing the salary threshold for exempt employees under the Fair Labor Standards Act (“FLSA”).  The DOL estimates that 1.2 million additional workers will be entitled to minimum wage and overtime pay as a result of the final rule, which will take effect on January 1, 2020.
The final rule raises the earnings thresholds necessary to exempt executive, administrative and professional employees from the FLSA’s minimum wage and overtime requirements. In the final rule, the DOL is: 1) raising the standard salary level to $35,568 per year or $684 per week (currently $23,660 per year or $455 per week); 2) raising the total annual compensation requirement for highly compensated employees to $107,432 (currently $100,000); 3) allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) paid annually to satisfy up to 10% of the standard salary level; and 4) revising the special salary levels for workers in U.S. territories and the motion picture industry.
Find more information on the final rule here and view the final rule text here.
Takeaway: The DOL’s announcement leaves employers with just over 90 days to come into compliance with the final rule. As a result, employers will need to make decisions about employees whose salaries are currently below the new threshold.  Employers will need to either raise salaries for currently exempt employees or reclassify these employees as non-exempt and eligible for overtime.