On September 24, the U.S. Department of Labor (DOL) released the final rules increasing the minimum salary level for the Fair Labor Standards Act (FLSA) “white collar” exemptions from $455 to $684 per week. The proposed rules, which were published in March, had set the salary level at $679 per week. Effective January 1, 2020, the final rule states:
- Raises the salary threshold to $684 a week or $35,568 a year (up from $455 a week or $23,660 a year). This translates to a salary threshold of $1,368 for employees paid on a biweekly basis, $1,482 for employees paid on a semimonthly basis, and $2,964 for employees paid monthly. The rule sets the standard salary level at the 20th percentile of earnings of full-time salaried workers in the lowest-wage region (the South) and/or in the retail industry nationally.
- Raises the total annual compensation requirement for highly compensated employees (HCEs) to $107,432 (up from $100,000 per year). The rule sets the total annual compensation level at the 80th percentile of full-time salaried workers nationally. As part of an exempt HCE’s annual compensation, the employee must receive at least the new standard salary amount of $684 per week on a salary or fee basis (without regard to the payment of nondiscretionary bonuses and incentive payments).
- Allows employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices. Employers must pay exempt employees 90% of the standard salary level ($615.60 per week), and if at the end of the 52-week period the salary paid plus the additional payments do not equal the standard salary level for 52 weeks ($35,568), the employer would have one pay period to make up for the shortfall (up to 10% of the standard salary level, $3,556.80).
- Revises the special salary levels for workers in U.S. territories. The rule sets the salary threshold at $455 per week in Puerto Rico, the Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands. In American Samoa, the salary threshold is set at $380 per week.
- Revises the special salary level for workers in the motion picture industry. The special weekly base rate for the motion picture industry increases to $1,043 per week (or a proportionate amount based on the number of days worked).
The final rule does not make changes to the job duties test, and it does not include a provision to automatically adjust the salary threshold. While it declined to adopt its earlier proposal to adjust the standard salary and HCE thresholds every four years, the DOL reaffirmed its intent to update the standard salary level and HCE total annual compensation threshold more regularly in the future using the notice and comment rulemaking process.
The rule has been submitted for publication in the Federal Register, but has not yet been scheduled for publication. However, a prepublication version is available on the DOL website. In addition, the DOL has published a Fact Sheet and Frequently Asked Questions concerning the final rule.
Questions?
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