Minimum Salary Increase for 2020
The Fair Labor Standards Act (FLSA) entitles most employees to at least minimum wage for all hours worked and at least one and one-half times their regular rate of pay for hours worked in excess of 40 per week. There are many exceptions to these requirements called “exemptions.” Certain exemptions, such as the executive, administrative, and professional exemptions, have minimum salary requirements that employees must be paid in order for the exemption to apply (in addition to other requirements dealing with the employee’s actual work). For many years, the minimum salary for most of these exemptions has been $455 per week. That is about to change.
On September 24, 2019, the U.S. Department of Labor (DOL), the administrative agency responsible for handling FLSA issues, issued a final rule changing the minimum salary requirement for so-called “white-collar” exemptions. The current minimum salary is $455 per week, or $23,660 annually. The new minimum salary will be $684 per week, or $35,568 annually. This number was based on the 20th percentile of weekly earnings for full-time salaried workers in the lowest income census region (currently the South). This rule is scheduled to take effect on January 1, 2020.
In 2016, the DOL proposed changing the minimum salary to the white-collar exemptions to $47,476 per year. Although the rule went through the final stages at the DOL, it was challenged and ultimately stopped by a federal court in Texas.
Assuming the new rule is not stopped (and, at this time, there is no reason to think it will be), the DOL estimates that 1.3 million additional U.S. workers will become eligible for overtime starting in January, or a pay increase so that they meet the new minimum salary requirements.
The new rule allows for up to 10% of the standard salary level to come from non-discretionary bonuses and incentive payments (including commissions) that are paid at least annually.
In addition to raising the minimum salary requirement for white-collar exemptions, the new rule also raises the salary threshold for the “highly compensated employee exemption.” The current minimum salary for this exemption is a $100,000 annual salary. It will increase to a $107,432 annual salary.
UAP employer contacts should coordinate with our payroll department to change these minimum salaries, or to convert employees to hourly, if any of your employees do not meet the new threshold.