New U.S. Department of Labor Regulation to Affect 1.3 Million American Workers

By Alicia Nesline Shaw

Early this week (September 24, 2019), new regulations affecting compensation for exempt employees under the Fair Labor Standards Act will take effect on January 1, 2020. The new regulations increase the salary threshold for exempt employees from $455 to $684 per week, which equals $35,568 annually. This means that any employee who is properly classified as exempt because of their job duties, must also be compensated a minimum annual salary of $35,568 as of January 1st. The minimum salary required for an employee who is exempt as a highly compensated employee will also increase from $100,000 to $107,432 per year.

In addition, the new rules allow employers to use non-discretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the required salary level. There are no changes to the job duties required for any exemption, and of course, an exempt employee must continue to satisfy both the applicable job duties and salary threshold for their particular exemption. The DOL anticipates this change to affect approximately 1.3 million employees. Employers should review their exempt employees’ compensation to make certain it will continue to qualify them as exempt, and be prepared to make adjustments if it will not.

If you have any questions about complying with this new rule, please contact one of our business attorneys.

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