Raising The Bar: DOL Ups Salary Basis Requirement For Overtime Exemptions

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Photo Credit: istock.com/takasuu

Written by Jeremy Mittman 

This week, the U.S. Department of Labor (“DOL”) unveiled the final version of its overtime exemption rule, which sets the annual salary threshold workers need to exceed to qualify for the Fair Labor Standards Act’s (“FLSA”) “white collar” exemptions at $35,568 per year (up from the current annual salary threshold of $23,660).  The DOL estimates that about 1.3 million workers who hadn’t previously been eligible for overtime will now stand to receive it once the rule takes effect on January 1, 2020.


The FLSA’s “white collar” exemptions apply to employees employed in bona fide administrative, executive, professional, and computer-related capacities, as well as outside sales employees.  If employees meet the requirements for these exemptions (including, where applicable, the salary basis requirement), employers need not pay them overtime for any time worked over 40 hours per week under federal law.


The DOL’s new rule, however, does not significantly impact employers in California, where the salary required to meet the State’s “white collar” exemptions is higher than that required under the FLSA.  


Under California law, the salary basis requirement is twice the state minimum hourly wage based on a 40-hour workweek.  For example, California’s current minimum wage is $12 per hour for employers with 26 or more employees, meaning the salary basis requirement for these employees is now $49,920 per year (or $45,760 per year for employers with 25 or fewer employees).


An “exempt misclassification” claim is still a favorite one for plaintiff’s lawyers, so employers would be well advised to audit their exempt positions to ensure compliance with California labor laws.  


In fact, it is rarely the amount alone paid to the employee that is the stumbling block— rather it is California’s strict definitions of the types of positions and job duties that are appropriately exempt which can lead to potential exposure.  Many employers are often surprised at the limited number of positions that clearly qualify as exempt under the law.

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