Updated FLSA Minimum Salary Requirement for White Collar Exemption

AAEAAQAAAAAAAAXnAAAAJGMzY2Q0NzZhLTk0Y2YtNDQ1ZS1hNDVlLTA2NjU2ZDcyZDQwYQMost employees are entitled to receive overtime premium pay when they work beyond a certain number of hours in a day or week. Under both state and federal law, certain employees, because of their job duties and compensation, can be considered “exempt” from overtime. The most common exemptions are the so-called “White Collar” exemptions, for executive, administrative and professional employees.

On May 18, 2016, the US Department of Labor published its Final Rule updating the Fair Labor Standards Act (FLSA) to increase the minimum compensation required for an employee to be properly classified under one of the White Collar exemptions. The Final Rule increases the minimum salary level from its present $455 per week ($23,660 annualized) to $913 per week ($47,476 annualized). Employers can count nondiscretionary bonuses and commissions toward up to 10% of this annual minimum.

Importantly, all of the other stringent “duties” requirements for an employee to be considered exempt remain unchanged. Finally, the Rule, which becomes effective December 1, 2016, provides for automatic increases in the salary levels every three years (beginning January 1, 2020).

What you should do: This is an excellent time to evaluate whether exempt employees are properly classified. This means, not only determining whether they will meet the increased salary requirements, but equally important is evaluating whether their job duties meet the specifications set forth under the FLSA (and California Wage Orders). We encourage you to involve your employment law counsel in this important analysis.

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