DOL Announces New Salary Threshold for White Collar Exemptions

On Sept. 24 the Department of Labor announced that effective Jan. 1, 2020, the salary threshold for an employee to be exempt from overtime under the administrative, executive, professional, and computer exemptions will increase from $455 per week to $684 per week (or $35,568 per year).

For employers, this new threshold means that employees who are currently exempt and earn a salary of less than $684 per week will, in most cases, become non-exempt. The change is expected to impact an estimated 1.2 million workers.

Other less impactful changes the DOL announced:

  • Raising the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year;
  • Allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices; and
  • Revising the special salary levels for workers in U.S. territories and the motion picture industry

Employers, you only have a little more than three months to get your FLSA houses in order. If you have exempt employees earning a salary of less than $684 per week (which is not all that uncommon in retail, restaurants, schools, or nonprofits), you need to figure out whether to gross them up to the minimum salary threshold to maintain their exemption or convert them to non-exempt and overtime eligible.

Do you know how many hours per week your exempt employees work? Probably not. Yet if you don’t know this vital information, you have no way to know whether to gross them up to maintain their exemption or convert them to non-exempt status. It’s also a good excuse to audit all of your wage and hour practices.

Practically speaking, this change will not make much of a difference for most employers and most employees. The vast majority of workers who earn between $455 per week and $684 likely do not exercise the degree of independent judgment over matters of significance necessary to qualify for one of the exemptions.

Still, however, you cannot sleep on this issue and take a chance that you have non-exempt employees post-1/2/20 to whom you are not paying overtime. The time to examine this issue in your workplace is now, and it’s quickly ticking away.

You can read all about these new rules here, along with a helpful fact sheetFAQ and guide for small businesses.

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