U.S. Department of Labor Announces new Salary Threshold
Legal updates
U.S. Department of Labor Announces New Salary Threshold
September 24, 2019
The United States Department of Labor ("U.S. DOL") announced today the final regulations regarding the annual minimum salary threshold for the White Collar overtime exemptions (executive, administrative, professional) under the Fair Labor Standards Act. Effective January 1, 2020, the new minimum salary to classify an employee as exempt from overtime requirements will be $35,568 per year. This is an increase of more than 50% from the current threshold of $23,600 per year, but less than the Obama administration’s proposed $47,476 threshold. The U.S. DOL also increased the threshold for the “highly compensated employee” exemption from $100,000 to $107,432 per year. In addition, starting in 2020, employers will be allowed to use non-discretionary bonuses and incentive payments that are paid at least annually to satisfy up to 10 percent of the standard salary level.
All employers are encouraged to review their exempt employee classifications to make sure that all exempt employees meet the new minimum salary requirement. If a currently exempt employee falls below the minimum salary, employers have two, basic options: increase the salary before January 1, 2020, or change the classification to non-exempt and pay overtime when legally required.
Employers are also reminded that the salary basis test is just one-half of the legal standard required to classify an employee as an exempt employee. Employees also must satisfy one of the “duties” tests for exempt classifications, most commonly the Administrative, Executive, or Professional employee exemptions.
If you have any doubt whatsoever about the classification of your exempt employees, now is the time to act. Please consult with your attorneys at Clark Baird Smith about application of these tests to your workforce
The CBS LLP Legal Update is prepared for general information purposes only. Summaries of recent court opinions and other legal developments are not necessarily inclusive of all the recent legal authority of which you should be aware when making your legal decisions. Thus, while every effort has been made to ensure accuracy, you should not act on the information contained herein without seeking more specific legal advice on the application and interpretation of these developments to any particular situation.
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