Minimum Wage, Overtime Exemption: Labor Department
Imposes a Salary Threshold Hike for All Employees - Including Highly
The new $35,568 threshold, effective January 1,
2020, is applicable to
all employees who an employer seeks to classify as exempt as an executive,
administrative, or professional employee.
On September 24, 2019, the U.S. Department of Labor (DOL) announced a
new rule that, on January 1, 2020, will increase the salary threshold - from
$23,660 to $35,568 - for employees that are exempt from minimum wage and
overtime. The rule also increases the salary threshold for
employees classified as highly compensated employees from $134,004 to
The benefits to an employer of classifying an employee as exempt employee
pursuant to the Fair Labor Standards Act (FLSA) is that the employee loses
certain FLSA protections, such as overtime pay, federal minimum wage pay,
and applicable record-keeping requirements.
The new $35,568 threshold will be applicable to all employees who an
employer seeks to
classify as exempt as an executive, administrative, or professional
employee. This new salary requirement is substantially higher than the
current threshold of $23,660, but not as high as the 2016 proposed increase
to $47,476. Although the new threshold may appear to be relatively low, the DOL
anticipates that the new rule will expand overtime eligibility to
approximately 1.3 million workers. In calculating the new salary threshold
for the rule, the DOL applied the same methodology it used for the 2004
rule, which set the salary level at approximately the 20th percentile of
earnings of full-time salaried workers in the lowest-wage census region (the
South) and in the retail sector.
Employees who do not meet the work duties and responsibilities requirements
set forth by the FLSA's executive, administrative, or professional
exemptions may be classified as exempt if the easier-to-meet requirements of
the exemption for
highly compensated employees are satisfied.
Misclassification of employees can have significant adverse consequences to
an employer, including payment of unpaid back wages, liquidated damages, and
attorney's fees. Employers should review the salary levels of their
employees currently classified as exempt employees to determine whether this
proposed rule will impact them.
Employers should keep in mind that this rule
impacts only federal classification analysis, and they remain
obligated to comply with state or local rules addressing minimum wage and
overtime pay requirements.