Exempt Employee Minimum Salary Rate Increase

October 15, 2019

IECA legal counsel Whitfield & Eddy issued an alert to an increase in the minimum salary rate for exempt employees under the Fair Labor Standards Act (FLSA) which takes place on January 1, 2020.  County extension councils will want to make note of this increase as they consider exempt employee status and corresponding hours for their employees.

FLSA Exempt Employee Minimum Salary Rate Increase per Whitfield & Eddy Law

On September 24, 2019, the U.S. Department of Labor released its final rule increasing the minimum salary required for employees to qualify as exempt from the Fair Labor Standards Act’s overtime requirements.  The rule does not change the duties requirements.  The new rule is expected to make an estimated 1.3 million American workers newly eligible for overtime pay.
 
As you did in 2016 following the adoption of a similar rule with higher salary requirements, that was blocked by the courts, you will need to examine the salaries for your exempt positions to determine whether  employees continue to qualify for the overtime exemptions and make appropriate changes in either their salary or exempt status.

Major changes in the rule include:

  • New Salary Requirement: the final rule raises the “standard salary level” to $684 per week, which is equivalent to $35,568 per year for a full-year worker. Workers making less than the “standard salary level” will qualify for overtime pay. 
  • New HCE Salary Level: the final rule raises the total annual compensation requirement for “highly compensated employees” to $107,432 per year;
  • Bonuses and Incentive Payments: the final rule allows employers to use non-discretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level; and
  • Further Revisions: the final rule revises the special salary levels for workers in U.S. territories and the motion picture industry.

To qualify for an exemption from the final rule, an employee must generally:

  1. Be paid a salary (predetermined and fixed salary not subject to reduction because of variations in the quality or quantity of work performed);
  2. Be paid at least $684 per week (or $35,568 per year for a full-year worker); and 
  3. Primarily perform executive, administrative, or professional duties, as defined in the Department’s regulations.

The final rule has been submitted for publication, and will take effect on January 1, 2020.  

Please contact IECA Executive Director Terry Maloy (641-226-1541) if you have any questions regarding compliance with updated rule.