This morning the Department of Labor (DOL) announced the new salary threshold for exempt employees. Currently employees who meet certain job duties tests and are paid on a salary basis equal to at least $455 per week can be considered exempt from overtime. The new ruling increases the salary threshold from $455 per week to $684 per week. This new threshold is effective January 1, 2020.
The new threshold means that employers who have exempt employees making less than $684 need to either reclassify the employees as non-exempt (making them eligible for overtime pay when working more than 40 hours in a workweek ) or need to increase wages to be above the weekly minimum.
This is a good opportunity to also be sure you are properly classifying your salaried employees as exempt. Just paying based on salary does not make the employee an exempt employee. They must also meet certain job duties test. The new ruling does not make any changes to the duties tests. For more information about the duties tests, see below:
- Exemption for Executive Employees: Fact Sheet
- Exemption for Administrative Employees: Fact Sheet
- Exemption for Professional Employees: Fact Sheet
In addition to increasing the weekly salary minimum for exempt employees, the new rule from the Department of Labor also increases the highly compensated employee threshold from $100,000 per year to $107,432 per year (which includes a minimum of at least $684 per week on a salary or a fee basis).
The new ruling does not include automatic increases to the salary threshold, however the DOL has indicated that they intend to make more frequent adjustments in the future.
While the effective date of this new salary threshold is still a few months out, it is recommended that employers review the compensation of their exempt employees now to ensure compliance with the new weekly threshold of $684 and to plan and budget accordingly for changes that will need to be made.
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