Recent Department of Labor rules that set higher salary thresholds for exempt employees went into effect on January 1, 2020.
The U.S. Department of Labor issued new rules establishing higher salary thresholds for employees to be exempt from overtime payments. Under the prior DOL rules, employees were exempt from overtime pay requirements if the employee made over $455 per week, or $23,660 per year, and met certain tests regarding their job duties, i.e. that they fall under the executive, administrative, professional, computer employee, or outside sales exemptions.
Effective January 1, 2020, the salary threshold for overtime exemptions is now $684 per week, or to $35,568 for a full work year. In addition, in order to qualify as exempt from overtime requirements under the “Highly Compensated Employee” exemption, an employee must now be paid a minimum annual salary of $107,432. This is an increase from the prior $100,000 requirement. Highly Compensated Employees are those who meet this minimum salary threshold, who perform office or non-manual work and who regularly perform one of the duties of an executive, administrative or professional employee.
Up to 10% of an employee’s salary can be made up of nondiscretionary bonuses, incentive payments, and commissions, paid on a quarterly or more frequent basis. Employers who have not adjusted their rates of pay must do so immediately.
There were expected challenges to the new DOL rules, but to date I have not seen any.