Here We Go Again – DOL Releases New Rules Increasing the Salary Threshold for White-Collar Exemptions
Today, the U.S. Department of Labor announced a final rule increasing the salary threshold for employees to qualify for the “white-collar” exemptions from overtime pay (i.e., Executive, Administrative, and Professional exemptions). The DOL set the new salary minimum at $684 per week, or $35,568 per year. The annual salary threshold for “highly compensated employees” was raised from $100,000 to $107,432. The new rule allows employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the salary threshold, provided that such payments are made at least annually.
The new salary threshold is roughly half-way between the $47,800 minimum proposed by the Obama DOL in 2016 and the $23,660 currently in effect. The DOL estimates that this rule will impact 1.3 million workers across the nation making them now eligible for overtime compensation.
Importantly, the new rule makes no changes to the “duties” test for white-collar exemptions. Thus, unless an employee’s job duties satisfy the duties requirements in the current rules, the employee will be entitled to overtime pay no matter how much the employee earns each year. In addition to reviewing the salary levels of exempt, white collar employees, employers should also review their job duties and determine if they meet the requirements for exemption. If they do not, these new rules may provide employers with an opportunity to change an employee’s status from exempt to non-exempt without drawing unnecessary attention to the potential misclassification issue.
The new rule is scheduled to take effect on January 1, 2020. Employers who remember the last time the DOL tried to raise the white-collar salary threshold will recall that the rule was enjoined at the last minute by a federal judge. Lawsuits will undoubtedly be filed in federal court once again, and it is possible the rule will be enjoined. Because January 1 is only three months away, however, we recommend employers take steps now to comply with the new rule. We will keep you informed of meaningful developments.
If you have any questions about this announcement from the DOL, please contact the authors or your Miller Johnson Employment and Labor attorney.