FLSA Exempt Employee Minimum Salary Rate Increase

09.26.2019

On September 24, 2019, the U.S. Department of Labor released its final rule increasing the minimum salary required for employees to qualify as exempt from the Fair Labor Standards Act’s overtime requirements. The rule does not change the duties requirements. The new rule is expected to make an estimated 1.3 million American workers newly eligible for overtime pay.

As in 2016 following the adoption of a similar rule with higher salary requirements, that was blocked by the courts, employers will need to examine the salaries for their exempt positions to determine whether employees continue to qualify for the overtime exemptions and make appropriate changes in either their salary or exempt status.

Major changes in the rule include:

  • New Salary Requirement: the final rule raises the “standard salary level” to $684 per week, which is equivalent to $35,568 per year for a full-year worker. Workers making less than the “standard salary level” will qualify for overtime pay.
  • New HCE Salary Level: the final rule raises the total annual compensation requirement for “highly compensated employees” to $107,432 per year;
  • Bonuses and Incentive Payments: the final rule allows employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level; and
  • Further Revisions: the final rule revises the special salary levels for workers in U.S. territories and the motion picture industry.

To qualify for an exemption from the final rule, an employee must generally:

  1. Be paid a salary (predetermined and fixed salary not subject to reduction because of variations in the quality or quantity of work performed);
  2. Be paid at least $684 per week (or $35,568 per year for a full-year worker); and
  3. Primarily perform executive, administrative, or professional duties, as defined in the Department’s regulations.

The final rule has been submitted for publication, and will take effect on January 1, 2020.

Please contact Jaki Samuelson or Kay Oskvig at 515-288-6041 with any questions regarding compliance with updated rule.

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