U.S. Department of Labor Issues Final Regulations Raising the Minimum Salary Threshold and Increases the Threshold for the Highly Compensated Employee Exemption
On September 24, 2019, the United States Department of Labor (“DOL”) issued its long-awaited final rule that will increase the minimum salary threshold that is required to be paid to employees who otherwise meet the “white collar” exemptions. The new rule is effective January 1, 2020 and will require employees be paid $684/week (equating to $35,568/year) on a salary basis in order to qualify as an exempt employee under the Fair Labor Standards Act (“FLSA”). Exempt employees are not entitled to overtime pay for work performed over 40 hours/week.
By way of background, in order to satisfy the “white collar exemptions,” an employee must: 1) satisfy the applicable “duties test”; 2) be paid on a salary or fee basis; and 3) be paid at a certain minimum salary threshold, as set forth above. The “white collar” exemptions include the executive, administrative and professional exemptions. The current minimum salary threshold (which has been in place for decades) requires payment of $455/week or $23,600/year. Employers who fail to satisfy the minimum salary level will lose the exemption for their employees and be required to pay overtime at the legal rate.
The current rules also contain a “highly compensated employee exemption.” This exemption provides that if an employee earns at least $100,000/year on a salary basis, the employee is subject to a relaxed duties test. Effective January 1, 2010, in order to take advantage of the “highly compensated employee exemption,” the employee will need to be paid a salary of at least $107,432/year.
Tri-state area employers should note that New Jersey follows the federal rule in this area. New York employers, however, must note that New York has set a higher minimum salary level and, depending on an employer’s size and location, the minimum salary level will range from $832/week to $1,125/week.
Employers are well advised to consult counsel in determining employees’ exempt or nonexempt status.
As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.
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