On Tuesday, the U.S. Department of Labor finalized its rule regarding the salary thresholds for the Fair Labor Standards Act’s overtime exemptions for so-called “white collar” workers. The FLSA requires that American employees receive minimum wage and overtime pay, unless they are subject to one of the law’s exemptions. The overtime exemptions for executive, administrative, and professional workers require that the employee perform specified job duties and receive a minimum salary. The DOL’s new rule changed this salary threshold for the executive, administrative, and professional exemptions, potentially impacting over one million workers.
Here are three key takeaways from this highly-anticipated rule:
- The new salary threshold is $684 per week ($35,568 per year). This is an increase from the existing threshold of $23,660 per year, but less than the increase to $47,476 per year proposed by the Obama administration and enjoined by a federal court in Texas in 2016. The total annual compensation for the separate highly compensated employees exemption was also increased from $100,000 to $107,432.
- Businesses must comply with this new rule by January 1, 2020. Perhaps most alarming for business owners, they must ensure their workers are properly classified under this new rule in just a few months to avoid potential liability. The DOL estimates that this rule will make an additional 1.3 million workers eligible for overtime.
- The FLSA remains a trap for the unwary. Many business wrongly assume that if an employee is paid on a salary (rather than hourly) basis, they are automatically exempt from the FLSA’s requirements. However, businesses must also ensure that their employees meet the specific job duty requirements under the various exemptions. Employers should consider whether it would be more efficient to give employees raises to meet the increased salary thresholds instead of having to calculate and pay employees overtime.