On September 24, 2019, the United States Department of Labor (DOL) released its final rules for establishing the amounts required to be earned by an employee, to be exempt from the Fair Labor Standards Act (FLSA) overtime requirements.

Under the final rule to be effective January 1, 2020, the amounts required to be earned by an employee for that employee to be exempt from the FLSA overtime requirements will be $684 per week ($35,568 annually).

The new salary level for a Highly Compensated Employee (HCE) will be increased to $107,432 from the current level of $100,000.

Despite the ruling, these federal changes won’t have any effect on employers in California who already need to pay twice the state’s minimum wage to satisfy the requirements for exempt status.  With a minimum wage of $12 an hour (for Employer’s with 26 or more employees), that is $49,920 in 2019.  And that amount goes up as the minimum wage increases a dollar a year until it hits $15 for all employers in January 1, 2023; at that time the minimum salary level for exempt status in California will be $62,400.

As under the Obama rules and the proposed rules, the final rules permit employers to satisfy the new salary-level requirement by using nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the salary level test. Also, there is no change to the duties requirements to be considered exempt from FLSA overtime in addition to the required threshold.

The final rule does not provide for any automatic increases to the salary thresholds. In the final ruling, the DOL reaffirmed “its intent to update the standard salary level and HCE total annual compensation threshold more regularly in the future using notice and comment rulemaking” but declined to adopt the proposed rule to revisit the salary levels every four years. Under the Obama rules, a mechanism for automatically updating the salary and compensation levels every three years was established, starting on January 1, 2020.

For a copy of the DOL final rule, click on the link provided below.
https://www.dol.gov/whd/overtime2019/overtime_FR.pdf

The DOL has also released the following documents in conjunction with the final rule:

Fact Sheet:  https://www.dol.gov/whd/overtime2019/overtime_FS.htm

Frequently Asked Questions:

https://www.dol.gov/whd/overtime2019/overtime_FAQ.htm#10

Naphar Isley, CCP, GRP