DOL Issues Final Rule to Increase the Salary Basis Test for determining Exempt Status

October 3, 2019

On September 24, 2019, the United States Department of Labor announced its Final Rule to change the salary basis test, which is an integral test used by the DOL to determine whether certain employees shall be considered “exempt” from the protections of the Fair Labor Standards Act concerning minimum wage and overtime pay.

Briefly, in order for an employee to be considered “exempt” from the protections of the FLSA, that employee must now receive an annual salary of no less than $35,568, or $684 weekly (up from $455 weekly). Only employees working certain kinds of jobs can be considered for exempt status, regardless of salary, including such workers who are primarily executives, professionals, administrators, outside sales people, and others whose jobs primarily involve defined “exempt duties”.

That said, there is a hybrid exemption that allows employers to treat a “highly compensated employee” as exempt from the protections of the FLSA so long as such employee has at least some “exempt” duties and is paid at a certain benchmark. The new Final Rule increases this benchmark to a salary level af at least $107,432 annually (up from $100,000 annually).

There are other changes too which you can see in the DOL’s announcement. While these changes are significant, they represent essentially half the increases the Obama Administration sought approximately 3 years ago. These regulations take effect January 1, 2020.