Buckle up – here we go! DOL has proposed $35,308 as the new FLSA Exempt Salary Threshold
Updated: Mar 26, 2019
The Department of Labor is issuing a proposed ruling that the new exempt salary threshold is going to be set at $35,308. With the publishing in the Federal Register on March 22nd, the 60-day comment period will end May 21st. This will allow the public to respond to this proposed ruling and provide feedback, input and suggestions for the DOL’s consideration.
Here is what is proposed:
Increases the minimum salary required for an employee to qualify for exemption from the currently enforced level of $455 a week to $679 per week ($35,308 annually).
“Highly Compensated Employees” (HCE) will go from the current level of $100,000 to $147,414.
A commitment to periodic review to update the salary threshold, requiring notice-and-comment rulemaking.
Allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10% of the standard salary level.
There are no changes in overtime protections for: Police Officers; Firefighters; Paramedics; Nurses; Laborers including: non-management production-line employees; Non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumber, iron workers, craftsmen, operating engineers, longshoremen, and construction workers.
No changes to the job duties tests.
No automatic adjustments to the salary threshold.
It is now expected that the final ruling will be ready to go into effect January 1, 2020. Though that is a number of months away – time will fly, and you will get busy.
Here is what you need to do NOW
Take a look at your positions and determine if you have them categorized properly for being exempt and non-exempt. If you just said out loud – “I don’t know what that means!”, give me a call and I will be happy to help you!
If you know you have all your positions classified correctly per FLSA guidelines, the next thing you need to do is see if you have any exempt positions currently being paid under $35,308. If so, here’s what you need to do:
Conduct a study to see how many hours those employees work. If they routinely work more than 40 hours a week, you can estimate how much your overtime costs would be when the employee has to be made non-exempt.
Once you have that data, then consider your options:
Keep the position exempt and raise the employees’ salaries in those positions to $35,308.
Reclassify the position to non-exempt and budget for the additional amount that would be needed to pay for overtime.
Reclassify the position to non-exempt, restrict overtime, and hire additional help to handle the work load – that would cause the overtime. You might be able to hire a part-time person for less than the overtime cost.
Reclassify the position to non-exempt and move tasks (that drive the overtime) to a different exempt employee – that will be a real crowd pleaser!
Reclassify the position to non-exempt and adjust the employee’s hourly rate so the number of hours they work (including all of the estimated overtime) would equal their salary now (another great “morale-busting” choice!)
After reviewing these options, you can make an informed decision. The bottom line is, this change is coming. The good news is, however it unfolds, you will have done your analysis and you will be prepared for January 2020!
WARNING: There are LOTS of issues and unintended consequences with this proposed change. I will be happy to help you work through these issues, reach out to me.