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The Department of Labor (DOL) has proposed an increase to the minimum salary that an employee should earn in order to be exempt from minimum wage and overtime under a white collar exemption. The implementation of this rule is anticipated to be January 2020.
The proposal recommends that salaried exempt executive, professional, administrative, and computer employees be paid $679 per week (minimum) on a salary basis – a $224 increase from the current minimum. The rule permits non-discretionary bonuses and incentive payments accounting for up to 10% of the minimum, but only if they are dispensed at least yearly – as it stands, these types of payments are not included in the minimum.
The new rule also recommends that Highly Compensated Employees (HCEs – employees who own more than 5% of the interest in a business at any time during the present or previous year) must be paid at least $147,414 annually to be exempt, with at least $679 a week paid on a salary or fee basis.
The DOL has declared its intention to update these minimums every four years based on the fluctuation of the Consumer Price Index. These increases will not be automatic, but will be “done through notice and comment rulemaking,” – the same process on which this proposed rule is based (The HR Pros, 2019).
The new rule recommends no changes to the duties tests for white collar employees. Employers should know that paying an employee a minimum salary does not guarantee their classification as exempt. Each exemption type has a corresponding duties test. If an employee does not meet the demands of the duties test, then they are classified as non-exempt and entitled to minimum wage and overtime.
California and New York (and soon Washington) already have higher mandated minimum salaries in place for exempt white collar employees than these proposed thresholds. As employers must obey the most beneficial law for employees, the new proposed rule would not affect employers in these states.
Resources for employers navigating these change are available in the HR Support Center Library.
Once the rule has been uploaded to the Federal Register, you will be able to contribute comments and recommendations in a number of ways (see below). You must identify the Regulatory Information Number (RIN) so the comment can be linked to this proposed rule – its RIN is 1235-AA20. The rule is forecasted to be published next week.
Electronic comments: Submit through Federal eRulemaking Portal. Follow the instructions for submitting comments.
Written comments: Address and mail to:
Director of the Division of Regulations, Legislation, and Interpretation
Wage and Hour Division, U.S. Department of Labor
200 Constitution Avenue, N.W.
Washington, D.C. 20210