Newsletters and Alerts: Employment Alert

Federal Agency Issues New Minimum Salary Requirement for Exempt Employees

Thursday, September 26, 2019  
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Employment Law Alert: September 26, 2019

Federal Agency Issues New Minimum Salary
Requirement for Exempt Employees
The Department of Labor (DOL) announced this week the long-awaited revised Overtime Rule, which will set the minimum salary threshold for the Fair Labor Standard Act (FLSA) white-collar exemptions at $684 per week, or $35,568 per year. The current minimum salary is $455 per week or $23,660 annually.

The rule is estimated to expand overtime pay obligations to an estimated 1.3 million additional workers whose salary is currently lower than the new salary minimum in the revised DOL rule.

The new rule will take effect on January 1, 2020 and applies to the executive, administrative and professional exemption categories under the FLSA. There will be no “automatic” updates, or even a formal schedule of future adjustments to these figures.

As many employers remember, the DOL issued a rule in 2016 that would have raised the minimum weekly salary to $913 per week but employer groups challenged the rule on legal grounds and a federal court blocked the new rule from taking effect.

The newest version of the rule has a much lower minimum salary of $684 and is not expected to be heavily challenged. Therefore, employers should plan for this revised new minimum salary rule to actually take effect on January 1, 2020.
How should employers proceed?
There is no need to make immediate changes to your compensation structure as the rule doesn’t go into effect for several months. Employers should evaluate whether changes must be made based on the new minimum salary requirement and if so, develop a strategy around timing and communication.

Also remember that to classify an employee as “exempt” from overtime requirements, two conditions must be met:

First, the employee must be paid a “bona fide” salary that meets at least the minimum level. For the salary to meet the test under the FLSA, it must be a “predetermined amount that cannot be reduced because of variations in the quality or quantity of the employee’s work.”

Second, the employee’s actual job functions must meet the “duties test” under one of the exempt categories of jobs which includes executive, professional and administrative. These duties test can be challenging to understand and have been the subject of significant costly litigation.  

Employers should strongly consider:
  • Analyzing whether the job duties continue to meet the test under the relevant exemption category
  • Applying alternative FLSA exemption categories
  • Developing a new pay plan for those employees who have been treated as exempt but no longer meet the tests required

If your organization needs to evaluate its compliance with the new overtime rules, our attorneys are here to offer guidance and resources! Contact UEA at umta@unitedemployers.org or 503.595.2095


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