Earlier this month the United States Department of Labor announced a proposed rule change regarding the minimum salary required to qualify as exempt from overtime pay under the federal Fair Labor Standards Act white collar exemptions. A white collar worker is one who is employed in an executive, administrative, or professional position.
The proposed change to the exemption rule would increase an exempt salary amount from $23,360 annually to $35,308. If broken down into weekly figures, this would equal a weekly increase from $455 to $679. In layman's terms, this means that an employee who makes more than $35,308 per year would be exempt from overtime pay. Therefore, the employer would not be required to provide additional income for work over the standard 40 hours per week, or 8 hours per day.
One significant factor about this proposal is that it will allow employee bonuses and incentive pay to be used as up to 10% of an annual salary. At the end of a 52-week period, if an employer has not paid an employee who does not receive overtime pay a minimum of at least $35,308 total, including bonuses and incentive pay, then they will have one chance to make up the difference.
This rule, as it currently stands and as proposed, will apply a bit differently to workers in the state of California. California employers are required to comply with both the FLSA minimum salary for exempt status as well as with California state law, which lists an even higher minimum salary for white collar exempt status. However, they are not allowed to use bonus or incentive pay as part of an employee's salary to meet the minimum exemption requirements. Therefore, the new rule proposal will have an impact on employers who operate in multi-states, but on employees only in states other than California. If passed, the proposed rule change is expected to go into effect in January 2020. If you have any concerns about how it may affect you, feel free to consult with a labor law attorney.