DOL’s White Collar Exemptions Final

Employment Law

After several years—and significant changes to the plans—the Department of Labor (DOL) finalized the new minimum annual salary requirement for exempt executive, administrative and professional employees.

To qualify for the “white collar” exemptions to the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA), an employee must receive at least a minimum threshold salary and pass the requisite “duties test.” The current salary threshold is $455 per week, or $23,660 per year.

In 2016, the DOL proposed an increase that would have more than doubled the salary threshold requirement to $913 per week, or $47,476 per year. The amount was intended to match the 40th percentile of weekly earnings for full-time salaried workers employed in the lowest-wage U.S. Census region.

Before the change could take effect as scheduled, a coalition of 21 states filed suit. A federal court judge in Texas granted a preliminary injunction halting enforcement of the rule and the subsequent change in the federal administration caused the appeal to be shelved.

Taking a step back, the DOL released a request for information regarding the rule (which resulted in more than 200,000 comments) and held six “listening sessions” around the country.

Armed with stakeholder input, the DOL published a new proposed rule earlier this year that split the difference. The new salary threshold reflects an almost 50% increase from the current level—to $684 per week, or $35,568 per year—but doesn’t reach the heights of the prior proposal.

The new rule also increases the minimum salary for “highly compensated workers” under federal law from $100,000 to $107,432. Employers can include annual nondiscretionary bonuses, incentives and commissions to meet up to 10% of an employee’s minimum salary level for exempt status. If an employee’s nondiscretionary bonus or incentive payments in a specific 52-week period are too low, the new rule permits a “catch-up” payment within one pay period at the end of the 52 weeks to maintain exempt status.

“This rule brings a commonsense approach that offers consistency and certainty for employers as well as clarity and prosperity for American workers,” Acting Secretary of Labor Patrick Pizzella stated in a statement.

The final rule will take effect on January 1, 2020.

To read the DOL’s final rule, click here.

Why it matters: Employers now have clarity regarding the rule change and can prepare themselves for implementation on or before the effective date of January 1, 2020. The DOL—which indicated that it plans to adjust the salary thresholds “more regularly” in the future—estimates that 1.3 million workers currently classified as exempt will begin receiving overtime, with approximately 101,800 highly compensated employees becoming entitled to overtime as a result of the increase.



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