On September 24, 2019, the United States Department of Labor (DOL) issued its long-awaited final rule regarding the annual salary threshold for executive, administrative and professional (EAP) employees to qualify for overtime exemption under the Fair Labor Standards Act (FLSA).
The final rule is effective as of January 1, 2020.
Under the final rule, employees covered by the FLSA are now subject to the following exemption requirements:
The minimum salary required for an EAP employee to qualify as exempt from overtime would increase from the currently enforced level of $455 to $684 per week ($35,568 annually). This increase is lower than the $47,476 annual salary proposed by the Obama administration. According to the DOL, the new salary level increase would make more than a million more American workers eligible for overtime pay.
The total annual compensation requirement for “highly compensated employees” (HCE) would increase from the currently enforced level of $100,000 to $147,414 per year. This applies to HCE who perform office or non-manual work if they customarily and regularly perform at least one of the duties of an exempt EAP worker.
Employers may use nondiscretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10 percent of the standard salary level.
As a reminder, unless exempt, your employees covered by the FLSA must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay.
Also, the salary level test is only one factor in the analysis of whether your EAP employees are “exempt” from overtime. The job duties test, which looks at whether your EAP employees regularly perform one or more exempt job duties, is also used to determine whether your EAP employees are “exempt” from overtime. The final rule does not make any changes to the existing job duties test.
To keep wages in check, employers should consider implementing overtime policies that restrict non-exempt employees from working overtime without prior approval from management. Employers may also consider increasing salaries above $35,568 per year to maintain the exempt status of their currently exempt EAP employees.
No Change for New York Employers with Exempt Administrative or Executive Employees
The change to the FLSA overtime exemption rules will not impact New York employers’ exempt administrative and executive employees because the salary threshold is higher under New York State law than the $684 per week under FLSA.
The following table outlines the currently enforced threshold under New York State law for exempt administrative or executive employees:
New York employers with employees classified as exempt “professional” or other category must follow the FLSA minimum salary requirements.
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This Legal Briefing is intended for general informational and educational purposes only and should not be considered legal advice or counsel. The substance of this Legal Briefing is not intended to cover all legal issues or developments regarding the matter. Please consult with an attorney to ascertain how these new developments may relate to you or your business. © 2019 Law Offices of Pullano & Farrow PLLC