On March 7, the Department of Labor (DOL) announced that the salary level for white-collar exemption would increase. Do you feel like you have seen this before? Yes, you have!
And that’s because in November 2016 the Obama administration was getting ready to increase the exemption level to $47K/year. However, a federal court in Texas intervened and stopped its implementation. The exemption level didn’t increase and remained at $23,660 ($455/week). This is now likely to change in 2020.
Here’s what you need to know at this point:
- The proposed exemption level is set at $35,308 ($679 per week).This is good news for employers. This lower threshold to qualify for exemption is probably manageable by most.
- The limit for highly compensated employees (HCE) is likely to go up to $147,414 ($679 per week) from the current $100,000 total compensation. Those employees would qualify for exemption under the test for highly compensated employees (HCE). Few employees earning this level of compensation are classified as non-exempt but it happens in certain occupation (IT, manufacturing).
- Up to 10% of the $35,308 minimum salary requirement can be met with nondiscretionary bonuses, incentives, and commissions.
- No automatic increases to the minimum salary level or the highly compensated test is included in the DOL’s proposal.
- No change to the duties test. The existing job duty requirements to qualify for Executive, Administrative and Professional exemptions remain the same.
- This is a PROPOSAL. It is now open for public comments until May 21. It might even be challenged in court (remember 2016!). The earliest proposal would become law is in January 2020.
What should you do now? Although it’s a proposal, now is a good time to consider the potential impact of the new exemption could have on your workforce and budgets. Identify the exempt employees paid less than $35,300. Those are the ones most directly affected by this proposal. Determine if they will remain exempt or if they will be reclassified as non-exempt. No action is required at this time.