US DOL Issues Final Rule on Salary Threshold for Exempt Status

The US Department of Labor (DOL) has issued its final rule regarding the salary thresholds for exempt status which will raise the overtime standard salary level. The final rule will go into effect on January 1, 2020 and establishes the following:

  • In order for employees to be exempt from overtime under the executive, administrative or professional exemptions, they now must earn $684 per week (equivalent to $35,568 per year for a full-year worker). This has been raised from the current threshold of $455 per week ($23,660 per year);
  • In order to qualify for the “highly compensated exemption” employees must now earn at least $107,432 per year (formerly $100,000 per year);
  • Employers can use non-discretionary bonuses and incentive payments that are paid at least annually to satisfy up to 10% of the salary basis for the white collar exemptions (if this is utilized, the minimum salary paid can be no less than $615.60/week). It should be noted that (1) if the employee does not earn the bonus, the employer will need to pay the amount anyway no later than one week from the end of the 52 week period or the salary basis will not be met; and (2) if the employee leaves employment before the bonus is paid/earned, the employer will have to pay the pro-rata share of the bonus at termination to ensure the minimum salary threshold was met; and
  • The special salary level for the motion picture industry and US territories will also increase.

Employers should begin preparing now to ensure compliance with the new salary threshold. Notably, New York has thresholds that are higher than these increased federal standards, so many New York employers will already be in compliance. Contact us with any questions you may have with the new overtime rule.