Barring Successful Court Challenge, Federal Overtime Exemption Will Require Higher Salaries January 1, 2020
In 2016, the U.S. Department of Labor (DOL) issued a “Final Rule” more than doubling the minimum salary amounts for certain workers – administrative, executive, and professional, employees, as well as “highly compensated employees” (HCE) to qualify for overtime exemption under the Fair Labor Standards Act (FLSA).
That rule proved not to be final after all. A judge enjoined its enforcement. The challenge to that 2016 version remained on appeal but inactive until the Trump DOL recently rescinded and replaced it with a new Final Rule, effective January 1, 2020.
This federal regulation directs certain increases in the minimum compensation amounts for exempt workers but does not change the principal job duties required to qualify. See DOL Fact Sheet #17A.
For instance, the new regulation raises the minimum qualifying salary amount for overtime exempt professional, executive, and administrative employees from $455/week; $1,971.67/month; $23,660/year to $684/week; $2,964/month; $35,568/year.
Eligibility for the FLSA’s HCE exemption will require a minimum $107,432/year salary, up from the current $100,000.
For exempt motion picture industry workers, the DOL is raising the qualifying “base rate” for a full week to $1,043/week, or a proportionate amount of that minimum equal to one sixth of the base rate for each day worked in a shorter week.
The new regulation also permits employers to count ten percent of an exempt employee’s non-discretionary bonuses and other incentive compensation payments in the calculation of the applicable minimum salary amount.
No Immediate Effect on California’s Exempt-from-Overtime Criteria: This state’s salary minimums for “white collar” professional, executive, and administrative exempt employees already exceed these incoming federal standards. California’s salary threshold is the double the statewide hourly minimum wage for a 40-hour week. Thus, for 2020, with that minimum wage going to $13/hour for companies with 26 or more employees and $12.00/hour for businesses with 25 or fewer employees, minimum salaries to qualify for overtime exemptions will be $1,040/week; $4,506.67/month; $54,080/year for the 26-plus employers and $960/week; $4,160/month; $49,920/year for businesses with smaller payrolls.
California employers with exempt out-of-state employees will need to consider whether the new Final Rule affects what they are paying those employees.
See also:
- Find Out What’s New In 2020! CALIFORNIA EMPLOYERS: Annual Employment Law Seminar Covers the New and Enduring Workplace Essentials (November, 2019)
- Mid-Year Minimum Wage Rate Increases (June, 2019)
If you need assistance with working any of the issues raised by these new regulations, our attorneys, Tim Bowles, Cindy Bamforth or Helena Kobrin, can help.
Helena Kobrin
November 27, 2019