On Tuesday September 24, 2019, the DOL announced its latest attempt to raise the minimum salary required for application of the so-called EAP exemptions for executive, administrative and professional employees under the FLSA. Earlier this year, the DOL published a proposed EAP rule for public comment. The new final rule, which will take effect on January 1, 2020, incorporates most of that proposed rule. The DOL estimates that about 1.3 million workers who hadn’t previously been eligible for the overtime rule will now stand to receive it once the rule unveiled Tuesday takes effect.
Note that the final rule has been submitted to the Office of the Federal Register (OFR), but it has not yet been published. The DOL says the Federal Register version of the rule may vary slightly from the published document if the OFR makes minor technical or formatting changes. The Federal Register version will be the official final rule.
The final rule will:
- Raise the “standard salary level” from the current level of $455 per week to $684 per week ($35,568 per year for a full-year worker).
- Raise the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year.
- Allow employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices.
- Revise the special salary levels for workers in U.S. territories and the motion picture industry.
The current $455/week EAP salary threshold was adopted by the George W. Bush administration in 2004. In 2016 the Obama DOL published a final rule that moved the minimum salary to $913/week and made other changes to the regulation. That rule was eventually blocked by a federal judge in Texas just days before it could take effect. Subsequently, the Trump DOL put out a request for information in mid-2017 seeking feedback on proposals a new EAP rule, focusing on an increased salary test. Then in May 2019, DOL published a proposed rule in May of 2019, with the final rule announcement coming on September 24.
The January 1, 2020 effective date means employers should start now to prepare for the new rule. But as with the Obama-era rule, there are rumblings that this final rule may be challenged in court. The National Employment Law Project hinted at possible litigation in a statement that categorized the final rule as a “gift to corporate America.” So a word to the wise: If you currently have jobs which you classify as exempt, but the salaries do not meet the new minimum, you should now start thinking about how to address the situation. But you may wish to wait to implement your decisions until the dust settles.
Stay tuned to Wage and Hour Watch for tips on how to be ready for these changes.