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DOL Issues Final Rule Increasing Salary Thresholds

On September 24, 2019, the Department of Labor issued a final rule increasing the salary threshold for exempt employees and “highly compensated employees” under the Fair Labor Standards Act (“FLSA”). The final rule becomes effective on January 1, 2020. The rule raises the current minimum salary level for “exempt” employees, i.e. employees for whom overtime payments are not mandated, from $455 per week, or $23,660 annually, to $684 per week, or $35,568 annually. The rule also raised the salary threshold necessary to qualify for the highly compensated employee exemption from $100,000 to $107,432 annually. Under the new rule, employers are to use an employee’s bonuses, commission or incentive pay to satisfy up to 10 percent of the employee’s salary level requirements if (1) the bonus, commission or other incentive pay is nondiscretionary; and (2) it is received by the employee at least annually (during any given year or 52-week period). The final rule also contains a provision that enables employees to remain exempt when their nondiscretionary bonuses aren’t enough to meet the salary level required by an FLSA exemption if the employee makes a payment within one pay period at the of the 52-week period so that the employee is above the exempt employee threshold. As such payment “will count only toward the prior year’s salary amount and not toward the salary amount in the year in which it is paid.”

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