Department of Labor establishes new rule

On Tuesday, September 24, 2019 the U.S. Department of Labor made a final rule which, among other things, increases the minimum salary threshold required for employees to be classified as “exempt” under the white collar exemptions. Notably, it does not change the “duties” test which must also be met in order to properly classify an employee as “exempt” under the white collar exemptions.

With this new ruling, effective January 1, 2020, over 1.3 million employees may become eligible for overtime pay under the Fair Labor Standards Act. 

Under the prior rule, employees were entitled to  “exempt” status if they met the duties test, and if they earned a minimum $23,660 a year. The new rule will raise that threshold from the previous figure to $35,568 a year, thus giving more opportunities for employees to be entitled to overtime pay. 

How does your business need to respond to the new rule?

First, now is a good time to audit your classifications, and confirm that all of your employees are properly classified. 

Next, take a specific look at any employees who are classified as “exempt” and are being paid a salary between $24,000-$36,000. For this group in particular, consider your options for compliance with the new rule.  For example, you may re-classify an employee as non-exempt, keep the exempt status but increase the employee’s base salary, or consider a completely different alternative. Of course, we recommend that you call your employment law attorney to make sure that your business will be able to comply with this new rule while also reducing the impact on the business and its employees. 

The final rule also includes

  • Raising total annual compensation level for the highly compensated employee exemption
  • Allowing employers to use nondiscretionary bonuses and incentive payments that are paid at least annually to satisfy up to 10% of the standard salary level requirements 
  • Revising the special salary levels for workers in U.S. territories and in the motion picture industry 

Want to know more about this ruling? Our employment law practice team includes Nicole Murphey, Leslie Lasher, Valerie Bateman, or Beth Stanfield. Any of these attorneys would be happy to discuss the DOL Ruling and its potential implications on your business.