The U.S. Department of Labor (DOL) today issued its long-awaited final rule adjusting the salary level for exempt employees. The new rule will go into effect January 1, 2020 and raises the "standard salary level" from the currently enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker).
Under the new regulation, employees with a salary of less than $684 per week must be paid time and one-half for all hours over 40 per week. In order to keep an employee who is currently earning less than $35,568 annually in the exempt category, you will need to raise the employee’s salary to at least that level. Alternatively, employers can reclassify the employee as nonexempt and maintain the employee at a salary of less than $35,568 annually, but require the employee to record work hours and pay the overtime level for hours in excess of 40 per week. The employee can also be reclassified as hourly nonexempt, with the requirement for overtime pay.
As we have discussed in previous blogs, the rule change creates some difficult decisions for employers. If employees who are currently salaried are reclassified as hourly, they potentially will view the change as a loss of status or demotion, even though their compensation might actually increase if they work overtime. Employers will need to examine all positions with a salary of less than $35,568 and decide what changes are needed.
The new rule makes some other changes including the use of certain bonuses to satisfy the exempt salary level. The DOL’s notice about the rule can be found on its website at: