Along with the fireworks and other celebrations that welcomed the New Year, January 1, 2020 also marked the beginning of new increased salary threshold requirements that employers must meet to claim overtime exemptions for employees under the Fair Labor Standards Act (FLSA). Employers who have not already made adjustments to the new standards face some significant compliance decisions.
As previously reported in eLABORate, back in September the U.S. Department of Labor issued a much-anticipated final rule updating the salary thresholds necessary to exempt executive, administrative and professional employees from the minimum wage and overtime pay requirements of the FLSA. The DOL also updated the total annual compensation requirement for “highly compensated employees.” The updates are more modest than the Obama-era updates that were issued in 2016 but subsequently blocked by a federal court in Texas after prolonged litigation.
The new rule now in effect makes three significant changes to the salary/compensation needed for employees to fall under the exemptions for overtime pay requirements:
Unlike the Obama-era attempts to revise the Rule, the DOL’s final rule does not include automatic updates to the new salary thresholds. Instead, the DOL intends to update the salary thresholds with greater regularity than in the past, using notice-and-comment rulemaking. The new Rule does not alter the duties tests that apply to the various overtime exemptions, which also must be met.
Employers who are currently treating employees as exempt but not meeting the new salary requirements have a number of options, including:
Employers who improperly or mistakenly claim exemptions under the FLSA run a significant risk of costly litigation over unpaid overtime. Employers unsure of whether they are properly claiming exemptions under the FLSA should consult with their legal counsel.