It’s actually happening. The Department of Labor is increasing the minimum salary threshold for the Fair Labor Standards Act’s white-collar minimum wage and overtime exemptions. On January 1, 2020, an estimated 1.3 million executive, administrative and professional employees will lose their FLSA-exempt status. Without some form of corrective action, employers will have to start paying overtime compensation to these newly-nonexempt employees.
The current standard salary level for exempt white-collar employees is $455 per week. Under the Final Rule, the minimum standard salary level for exempt executive, administrative and professional employees will be:
Weekly: $684 (+ $229)
Bi-weekly: $1,368 (+ $458)
Semi-Monthly: $1,482 (+ 496.17)
Monthly: $2,964 (+ $992.34)
Annually: $35,568 (+11,908)
The Final Rule also:
- increases the total annual compensation requirement for exempt “highly compensated employees” from $100,000 to $107,432 per year;
- allows nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level; and
- revises the special salary levels for workers in U.S. territories and in the motion picture industry.
Employers don’t have much time to evaluate options and take corrective action, which depending on the circumstances, may include:
- increasing salaries to maintain exempt status;
- prohibiting previously exempt employees from working more than 40 hours in a single workweek (and making sure they don’t); or
- paying overtime compensation to newly-nonexempt employees.
Corrective actions should be based on business necessity and applied in a uniform, non-discriminatory manner. They must also be implemented no later than January 1 ,2020.
Since change often creates uncertainty, employers should carry Employment Practices Liability Insurance that includes limited wage & hour coverage. Please contact us if you would like to learn more about employment practices liability insurance.