Department of Labor Increases the Annual Salary Threshold for “White Collar” Exemptions

The U.S. Department of Labor (“DOL”) has released new regulations governing the exempt status of executive, administrative and professional employees under the Fair Labor Standards Act (“FLSA”), also known as the “white collar” exemptions. Under the FLSA, an employee is exempt from overtime pay only if he or she performs certain duties and earns at least a set minimum salary.

Effective January 1, 2020, the minimum salary threshold for the white collar exemptions increases from $455 per week ($23,660 per year) to $684 per week ($35,568 per year). This is an increase from the current threshold but less than the increase to $913 per week ($47,476 per year) proposed by a 2016 final rule. The 2016 final rule was held to be invalid by a federal court in Texas and never implemented.

Additionally, under the new rule:

1. Employers can use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new minimum salary threshold.
2. The total minimum annual compensation requirement for the highly compensated employee exemption increases from $100,000 to $107,432. This increase is based on the 80^th percentile of full-time salaried workers' earnings nationwide.
3. The DOL intends to update these compensation thresholds more regularly in the future.

Although the new rule does not include any changes to the “duties test” for determining whether one of the exemptions is satisfied, the DOL predicts that more than 1.3 million workers will be impacted. Over the coming months, employers should review their current employees’ salaries and duties to ensure that they satisfy the applicable exemption’s criteria.

If you have any questions about the new white collar exemption salary threshold, please contact one of Honigman’s Labor and Employment attorneys.