The United States Department of Labor (“DOL”) issued a final rule on September 24, 2019, that raises the minimum salary threshold to $684 per week ($35,568 annually) for exempt “white collar” employees. In general, the white collar exemptions allow employers to avoid paying minimum wage and overtime to employees who primarily perform duties in a bona fide administrative, executive, professional, and/or computer-related capacity. The current minimum salary threshold of $455 per week ($23,600 annually) has been in place since 2004. Although the Obama administration’s DOL attempted to double the salary threshold in 2016, the courts blocked the rule from taking effect. This new rule will go into effect on January 1, 2020 – and it is expected to stand.
The new rule will not affect the duties that white collar employees must perform to meet the exemption’s requirements, but rather, only the amount of salary that an employer must pay the employee to take advantage of the exemption. The new rule also increases the salary level for the “highly compensated” exemption, which applies to high-paid employees who perform some managerial duties, from $100,000 to $107,432. The new rule does not include an automatic increase to the minimum salary thresholds because the DOL would prefer to raise or lower the threshold based on the economic conditions of the country.
The new rule carries a new benefit to employers. It allows employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10 percent of the salary threshold. For employers to credit nondiscretionary bonuses and incentive payments toward a portion of the salary threshold, they must make such payments on an annual or more frequent basis. But an employer may make a “catch-up” payment up to 10 percent of the total minimum salary level within one pay period of the end of the 52-week period to maintain the exemption.
Employers should remember that an employee must meet the duties requirements and minimum salary threshold for the employer to claim the exemption. Also, the employer must guarantee the employee a salary that meets the minimum salary threshold. Simply paying an employee an amount that meets or exceeds the threshold may not suffice for a guarantee and, therefore, could cause the employer to lose the protections and benefits of the exemption.
If you have any questions about how to prepare for these changes, please contact any member of Butler Snow’s Labor and Employment group.