Sept. 25, 2019 U.S. Department of Labor Announces Final Rule on Federal Overtime Exemptions

Yesterday, the U.S. Department of Labor announced a final rule changing the regulations governing the so-called “white collar” overtime exemptions for executive, administrative, and professional employees under the federal wage and hour law, the Fair Labor Standards Act (FLSA).

The new rule, which will take effect on January 1, 2020, will increase the salary threshold for these federal exemptions from the current level of $455 per week ($23,660 per year) to $684 per week ($35,568 per year). It will also allow employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the salary threshold.

The Department of Labor considered, but ultimately rejected, a proposal to establish automatic increases to this salary threshold designed to keep up with inflation. As a result, the new threshold will remain the same until the Department of Labor takes action to initiate a new increase.

The Obama administration’s attempt to increase the salary threshold in 2016 was struck down by a federal court. That proposal would have raised the federal salary threshold to $913 per week ($47,476 per year), and establish automatic updates to the salary threshold every three years.

California employers should keep in mind that the increased salary threshold for the federal white collar exemptions will have little or no impact in California, because the salary threshold under California state law is already higher than the new federal threshold. California law already requires an exempt employee to earn $960 per week ($49,920 per year) and that amount will increase in January of each year through 2022.

This E-Update was authored by Aaron A. Buckley.  For more information, please contact Mr. Buckley or any other Paul, Plevin attorney by calling 619.237.5200