On Tuesday, the U.S. Department of Labor issued its final rule concerning overtime exemptions. The rule increases the salary threshold for employees exempt under the executive, administrative, and professional exemptions (the “white collar exemptions”) from $455 per week (or $23,660 annually) to $684 per week (or $35,568 annually). Additional changes include:

  • Increasing the total annual compensation threshold for highly compensated employees (“HCEs”) from $100,000 per year to $107,432 per year;
  • Permitting employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10% of the increase salary threshold; and
  • Committing to updating the salary threshold more regularly.

The new rule is set to take effect on January 1, 2020 and increase the number of overtime-eligible employees by 1.3 million. No changes to the duties test have been made.

This isn’t the first time in recent years that we’ve had a final rule issued increasing the salary threshold for the white-collar exemptions. In 2016, the DOL, under President Obama’s administration, issued a final rule increasing the salary threshold to $913 per week (or $47,476 annually). The 2016 rule also increased the minimum salary for HCEs (to $134,004), allowed employers to use nondiscretionary bonuses and incentive pay to satisfy up to 10% of the salary threshold, and provided for automatic annual updates to keep the minimum salary level adjusted to the 40th percentile of full-time salaried workers in the lowest-wage Census region. Business groups and several states filed a lawsuit seeking to block the 2016 rules, arguing that the DOL exceeded its authority in adopting the rules. A federal district court in Texas agreed and blocked the rules from taking effect.

The new minimum salary threshold falls between the current salary threshold and the rule proposed under the Obama administration. While the 2016 rule was criticized by many business and employer groups, the new final rule is drawing fire from advocates for workers, who wish to force the administration to adopt something closer to the blocked 2016 rules. Legal challenges to the new rules are highly likely to follow.

We will keep you updated on any new developments as the effective date of the new rule approaches.

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Photo of Bill Pokorny Bill Pokorny

Bill is a partner at Franczek P.C. As co-chair of the firm’s Labor and Employment Practice Group, Bill is particularly versed in all aspects of state and federal law relating to minimum wages, overtime, exemptions, and wage payment issues. Bill also regularly counsels…

Bill is a partner at Franczek P.C. As co-chair of the firm’s Labor and Employment Practice Group, Bill is particularly versed in all aspects of state and federal law relating to minimum wages, overtime, exemptions, and wage payment issues. Bill also regularly counsels employers on issues relating to the Family and Medical Leave Act (FMLA), disability and accommodations. Bill provides management and employee training on workplace legal issues, and also conducts workplace investigations and legal audits. Bill also has extensive litigation experience, representing employers in federal and state courts and administrative agencies such as the U.S. and Illinois Departments of Labor and the Equal Employment Opportunity Commission. In 2014, Bill was named to the annual “40 Under 40” published by Law Bulletin Publishing which recognizes 40 attorneys under the age of 40 based on nominations by their clients, peers and the legal community.

Photo of Erin Fowler Erin Fowler

Erin is an associate at Franczek Radelet. Her practice focuses on counseling and representing employers on various employment and labor issues. Erin is an alumnus of the Firm’s Legal Education for the Advancement of Diversity and Scholarship (LEADS) Fellowship Program. LEADS is an…

Erin is an associate at Franczek Radelet. Her practice focuses on counseling and representing employers on various employment and labor issues. Erin is an alumnus of the Firm’s Legal Education for the Advancement of Diversity and Scholarship (LEADS) Fellowship Program. LEADS is an eight-week summer program designed for diverse first and second year law students with an interest in pursuing a legal career in private practice representing employers in labor and employment matters. Erin earned her J.D., cum laude, from the University of Illinois College of Law, and her B.A., magna cum laude, in behavioral science and human resource management from Oglethorpe University. While she attended Oglethorpe University, Erin was on the Dean’s List all semesters and a SCAC Scholar Athlete. She was on track and field team and the SCAC All-Sportsmanship Team in 2011. Erin was a SCAC Character & Community Student Athlete and SCAC/NCAA Woman of the Year Nominee in 2011.