As expected, the US Department of Labor issued a new final rule on FLSA overtime exemptions this week. The final rule raises the minimum salary for the executive, professional, administrative, and computer employee exemptions from the current $455 per week (about $23,600 annually) to $684 per week (about $35,500 annually). The total annual compensation required to meet the test for “highly compensated employees” will increase from $100,000 to $107,432. The rule is scheduled to go into effect on January 1, 2020.
While the rule raises the minimum salaries, it does not make any changes to the DOL’s “duties test” for executive, professional, and administrative employees. In order to be exempt under one of the categories, (1) an employee must earn at least $684 per week on a salary basis, and (2) the employee’s primary duties must be those required for the applicable category.
For those not keeping track, the DOL under the Obama administration issued a supposed final rule on May 23, 2016, which was scheduled to go into effect on January 1, 2017. That rule would have increased the salary threshold to $913 per week ($47,476 per year). On November 22, 2016, however, two weeks after the presidential election, a federal district court judge in Texas issued an injunction prohibiting the DOL from implementing and enforcing the rule. In August 2017, the judge granted summary judgment against the DOL, invalidating the rule. The DOL, now under the Trump administration, filed an appeal with the Fifth Circuit Court of Appeals. Rather than seeking to overturn the district court decision, however, the DOL asked the Fifth Circuit to hold the appeal in abeyance while it fashioned a new final rule.
The new final rule is likely to face its own legal challenges from various quarters. But, unless and until a court rules otherwise, most US employers will have to have to be in compliance come January 1, 2020.