In a long-awaited development, this week the Department of Labor has issued a final rule updating the salary threshold for the white-collar exemptions for executive, administrative, and professional employees. The Department expects the change to affect about 1.3 million workers, who will be reclassified as non-exempt or receive salary increases up to the new threshold, and to result in additional pay of $298.8 million a year.
The salary an exempt white-collar employee must be paid to qualify for the exemption will rise from the current $455 a week to $684 a week, or from $23,660 to 35,568 a year.
Except that employers need not pay the entire new salary threshold in salary; they can still retain the exemptions if they make up no more than 10% of the salary threshold with non-discretionary bonuses or incentive payments, such as commissions, or, if they fail to do that, they can make a “catch-up” payment within one pay period of the end of the 52-week period the “salary” is to be paid. The catch-up payment can be no more than 10% of the salary threshold. I trust that’s clear…. : )
The salary threshold for the white-collar exemptions was last raised in 2004. In 2016, the Obama Administration issued a rule to increase the threshold to $47,476 a year, but the increase was halted by litigation in Texas and then put on hold by the Trump Administration.
Of course, for an employee to qualify for one of the executive, administrative, or professional white-collar exemptions, the employee must also perform the specific kinds of duties for the exemption. The required duties are set out in Department of Labor regulations.
The new rule also ups the salary for the exemption for “highly compensated employees” from $100,000 to $107,432 a year, revised salary levels for employees in certain U.S. territories, and increased the special base rate for employees in the motion picture industry to $1,043 a week. Unless someone is interested, I won’t go into those changes.
The new rule takes effect on January 1, 2020.