The U.S. Department of Labor (DOL) announced its long-awaited final rule updating and revising the regulations issued under the Fair Labor Standards Act (FLSA) regarding the salary levels necessary to deem executive, administrative or professional employees exempt from the FLSA’s minimum wage and overtime pay requirements (the so-called “white collar exemptions”).
The DOL changes do not really impact California employers because the state minimum salary for the white collar overtime exemption for large employers is $49,920 and will increase to $54,080 (i.e., twice the minimum wage) on January 1, 2020. For states outside of California, here is what you need to know:
- The Final Rule is effective January 1, 2020;
- New federal salary level for white collar overtime exemptions will be $684 per week or $35,568 annually. Currently, the required salary is $455 per week ($23,660);
- The new salary level for the federal highly compensated overtime exemption (not recognized in California) will be $107,432. Currently, the required salary level is $100,000; and
- The Final Rule will permit employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10% of the standard salary level.
The Final Rule does not:
- Change the regulatory text for “primary duty”;
- Revise the tests for the duties required of executive, administrative, or professional employees;
- Alter the “salary basis” test;
- Change the computer employee exemption (other than the salary increase, if applicable); or
- Impose automatic increases to the salary levels (DOL says it intends to update the salary levels more regularly in future rulemaking).
The DOL also announced it was formally rescinding the 2016 Final Rule which would have gone much further in updating the FLSA regulations, but were never implemented by the Trump Administration.
Employers outside of California should be prepared to meet the new salary levels by the January 1 effective date. California employers with 26 or more employees should take this opportunity to review their overtime exempt positions to ensure they are paid at least $49,920 per year (set to go up to $54,080 as of Jan. 1, 2020.) For employers with 25 or fewer employees, the minimum salary for exempt employees is now $45,760 (rising to $49,920 as of Jan. 1, 2020)
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