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The U.S. Department of Labor Issues Final Rule Increasing the Standard Salary Level for Exempt Status

Koehler | Dinkel                      

Partners in Employment Management

Monthly Minute Memo

The U.S. Department of Labor Issues Final Rule Increasing the Standard Salary Level for Exempt Status

On Tuesday, September 24, 2019, the U.S. Department of Labor announced a final rule, which increases the salary basis threshold necessary to maintain exempt status for executive, administrative, and/or professional employees from the Fair Labor Standards Act’s minimum wage and overtime pay requirements.   The final rule is effective on January 1, 2020.

The U.S. Department of Labor updated both the minimum weekly standard salary level and the total annual compensation requirement for “highly compensated employees.”  The final rule provides for the following changes: 

  • The “standard salary level” is increased from the current level of $455 per week ($23,000 per year) to $684 per week ($35,568);
  • The total annual compensation requirement for “highly compensated employees” is increased from the current level of $100,000 per year to $107,432 per year; and
  • The new rule also allows employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level.

The U.S. Department of Labor estimates that 1.3 million additional workers will be entitled to wage and overtime pay as a result of the increase to the standard salary level.  The U.S. Department of Labor also estimates that an additional 102,000 workers will be entitled to overtime pay as a result of the increase to the “highly compensated employees” compensation level.  The final rule does not change the duties portion of the exempt employee evaluation. 

Employers should review the salary levels of their current salaried exempt employees and determine whether increases to their compensation structures are necessary in light of the increase in the standard salary level.  This is also a good time to re-evaluate the salaried employees’ duties and job descriptions to solidify exempt status.

This material is provided for informational purposes only.  It is not intended to constitute legal advice, nor does it create a client-lawyer relationship between K|D and any recipient.  Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions.

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