On Sept. 24, 2019, the U.S. Department of Labor (DOL) announced a new final rule that updates the salary thresholds that some individuals must meet in order to qualify for a minimum wage and overtime exemption under the federal Fair Labor Standards Act (FLSA). The final rule becomes effective on Jan. 1, 2020.

The final rule affects the exemptions for executive, administrative and professional (EAP) employees, highly compensated employees (HCEs), employees in the motion picture industry and individuals who work in various U.S. territories.

Highlights

  • The final rule increases the standard salary level for the EAP exemptions to $684 per week ($35,568 per year).
  • The final rule increases the HCE salary level to $107,432 per year.
  • The final rule permits using 10 percent of nondiscretionary bonuses to calculate an employee’s salary level.

Action Steps

The finale rule’s Jan. 1, 2020 effective date leaves little time for employers to prepare for the changes. Employers should:

  • determine which currently exempt employees have salaries below the new threshold; and
  • decide whether to increase salaries for these individuals or reclassify them as non-exempt employees.

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This regulatory update is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.