DOL Announces Final Rule Increasing Minimum Salary Threshold for FLSA White Collar Exemptions

In a much-anticipated move, the United States Department of Labor (“DOL”) announced today the final version of its new overtime exemption rule for the “white collar” exemptions. The rule sets a new minimum annual salary threshold that employees must be paid in order for the employee to qualify for the Fair Labor Standard Act’s (“FLSA”) white collar exemptions—i.e., the executive, administrative, and professional exemptions—at $35,568 per year or $684 per week. The rule will become effective on January 1, 2020.

The new minimum salary threshold for an employee to be considered exempt from FLSA’s overtime requirements is an increase from the current $23,660 annual salary or $455 weekly salary, which was last updated in 2004. It is approximately $12,000 lower than the Obama administration’s proposed $47,476 minimum salary threshold, which was blocked by a federal judge in Texas in 2017 before it became effective.

Under the new rule, employers will be permitted to count non-discretionary bonuses, incentives, and commissions as up to 10% of an employee’s salary level, as long as those bonuses are paid annually. The new rule also raises the salary threshold for the highly-compensated employee exemption from $100,000 to $107,432.

In the final rule, the DOL declined to adopt a mechanism from the Obama-era rule that would have automatically increased the white collar exemptions’ salary threshold every three years. In addition, in the final rule, the DOL did not make any changes to the FLSA’s “duties test.”

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