We know many of you have been awaiting word on new salary thresholds since the Obama administration’s 2016 proposal was struck down by the courts. Here is the new proposal in a nutshell:
“White collar” exemption salary threshold is planned to increase by $11,648
- To $679 weekly ($35,308 annually)
- From $455 weekly ($23,660 annually)
- Expected effective date January 2020
Some Background: In order to be eligible for the “white collar exemptions” from overtime, employees must meet three criteria: (1) the employee must perform certain specific duties, (2) the employee must be paid on a salary basis (the same amount weekly regardless of quality or quantity of work), and (3) the employee must be paid a minimum amount of salary… currently $455 per week. This minimum salary threshold has not changed since 2004. The Trump administration’s proposed rule would change the minimum amount of salary necessary to meet the test from $455 weekly to $679 weekly. The new rule would also allow employers to pay up to 10% of the threshold amount with certain nondiscretionary bonuses or commissions. Additionally, the proposed rule would increase the Highly Compensated Employee exemption to $147,414 annually, up from $100,000. Click here for the proposed rule and the DOL’s press release, fact sheet, and FAQs.
Next Steps: Before the rule can take effect, it will be published in the Federal Register, followed by a 60-day period when the DOL will accept comments on the rule. If the rule takes effect, an estimated 1.1 million employees who now meet these exemptions will become non-exempt unless their salaries rise to meet the new threshold. In anticipation, employers should assess the potential impact on their businesses, and start having conversations about planning changes to employee compensation.
For assistance with FLSA compliance and other employment laws and regulations, contact Nicole Gardner.