The Department of Labor (DOL) has released a new proposed rule to increase the minimum salary an employee must earn to be exempt from minimum wage and overtime under a white-collar exemption.
The Rule
The proposed rule requires that salaried exempt executive, professional, administrative, and computer employees must be paid at least $679 per week on a salary basis. This marks a $224 increase from the current minimum of $455 per week. The rule allows non-discretionary bonuses and incentive payments to account for up to 10% of the minimum salary. However, these must be paid out on at least an annual basis. Currently, commissions and bonuses cannot be counted toward the minimum.
The DOL also proposes that highly compensated employees must be paid at least $147,414 per year to qualify as exempt. Of that amount, employers must pay out at least $679 per week on a salary or fee basis.
The anticipated effective date of this rule is January 2020.
The Department of Labor intends to update these minimums every four years based on increases to the Consumer Price Index. These increases will not be automatic. Instead, the DOL will likely continue to issue notice-and-comment rulemakings, just as with this proposed rule.
Duties Tests
There are no proposed changes to the duties tests for the various white collar exemptions. Additionally, employers should be aware that paying someone a minimum salary does not necessarily mean they are properly classified as exempt. Each of the exemption types mentioned above has a corresponding duties test.
If the employee does not meet the duties test, then you cannot classify the employee as exempt. By failing to pass the duties test, the employee is non-exempt and therefore entitled to minimum wage and overtime, regardless of the method or amount of pay. You can learn more in the HR Support Center by entering the word exempt into the search bar.
State Minimum Salary Laws
California and New York (and soon Washington) already have laws in place that make the minimum salary for exempt white-collar employees higher than these proposed thresholds. As employers must follow the law that is more beneficial to employees, the new proposed federal minimums would not affect employers in these states.
Resources
Even though navigating through these laws can be tricky, don’t forget that SDP is here to help keep you compliant. As an SDP client, you receive free access to our HR Support Center which contains numerous resources to help you navigate this change. Search FLSA Changes to find a Decision-Making Guide, Implementation Guide, information about the duties tests, and more.
Need something a bit more hands-on? Let us know and we’d be happy to provide you more information on our proactive HR services like our comprehensive HR Audit. Last but not least, don’t forget to follow us on Facebook, Twitter, and LinkedIn to make sure you never miss a beat!
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