The U.S. Department of Labor (DOL) has increased the salary threshold for employees to be considered exempt from overtime pay under the Fair Labor Standards Act.
As the first increase in 15 years, employees will now need to earn $684 per week ($35,568 annually) – up from $455 per week ($23,660 annually).
Though this change will not impact California employees, who are already earning well above this federal threshold, it is expected to make over one million workers across the country newly eligible for overtime pay.
The new overtime rule also:
- increases the minimum salary for “highly compensated employees” from $100,000 to $107,432;
- permits employers to credit annual non-discretionary bonuses, commissions, and other incentive payments towards up to 10% of the minimum salary level; and
- revises salary levels applicable to the motion picture industry and individuals working in the U.S. territories.
If this all rings a bell, it is because DOL under President Obama attempted to change the minimum salary in 2016 to even higher levels, but a U.S. District Court judge in Texas enjoined the change using questionable legal reasoning and the Trump Administration chose not to appeal the decision.
The new rule takes effect on January 1, 2020. Before then, employers should review their pay practices with respect to exempt employees who are earning less than $684 per week. To the extent any exempt employees fall below this new minimum threshold, employers will need to increase their salaries or treat those individuals as non-exempt employees. Depending on the state in which the employees work, this may mean requiring the employees to clock in and out and providing meal and rest breaks, among other things.
China Westfall is an associate in Hirschfeld Kraemer LLP’s San Francisco office. She can be reached at firstname.lastname@example.org