Finally – The New DOL Rule on the Salary Test
On September 23, 2019, the United States Department of Labor (“DOL”) issued its final rule regarding the Fair Labor Standards Act’s (“FLSA”) salary test for the executive, administrative and professional exemptions. The final rule runs 245 pages, but its changes to the exemption test is relatively uncomplicated.
First, the salary level for exempt executive, administrative and professional employees has increased from $455 per week to $684 per week, or $35,568 annually. The calculation for the salary level based is determined by the 20th percentile of earnings of full-time salaried workers in the lowest-wage region (the South) and/or in the retail industry nationally.
Second, ten percent of this salary level can be met through non-discretionary bonuses and incentive pay. Further, employers can make a "catch up” payment within one pay period of the end of the 52-week salary period. However, the exempt employee must be paid at least 90% of the standard salary level in each pay period.
Third, DOL raised the salary threshold for the highly compensated employee (“HCE”) exemption to $107,432. The HCE salary level is determined based on the 80th percentile of full-time salaried workers nationally. To qualify for this exemption, employees must be paid at least $684 per week on a salary or fee basis. Otherwise, the HCE is unchanged.
Fourth, DOL did not establish a period in which the salary levels will be revisited or updated. It has stated that any changes will be made through the normal regulatory rule-making process.
Fifth, as anticipated, DOL made no changes to the duties test.
The final rule takes effect on January 1, 2020. It remains to be seen whether the final rule will be challenged in court.
Taylor English’s Employment Law group is available to assist employers in implementing these important changes to the FLSA.
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