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The Department of Labor issued a final rule on Sep. 24, 2019 increasing the salary-level threshold for white-collar exemptions to $684 a week from $455 a week. The final rule is effective Jan. 1, 2020 and is estimated to extend overtime protections to more than one million workers who are not currently eligible under federal law.

Under the September 2019 final rule:

  • Workers who do not earn at least $35,568 a year ($684 a week) would have to be paid overtime, even if they’re classified as a manager or professional.
  • Nondiscretionary bonuses and incentive payments (including commissions) paid on an annual or more frequent basis may be used to satisfy up to 10 percent of the standard salary level.
  • The special rule for highly compensated employees would require workers to earn a total annual compensation of at least $107,432 ($684 of which must be paid weekly on a salary or fee basis).
  • Special salary levels would apply to certain U.S. territories and an updated base rate would apply to employees in the motion-picture industry.
  • No changes to the duties tests.
  • The final rule is effective Jan. 1, 2020.
  • The Department of Labor intends to propose updates to the salary threshold regularly to ensure that these levels continue to provide useful tests for exemption. Updates would not be automatic and would continue to require notice-and-comment rulemaking.

Fair Labor Standards Act Classifications

Here are basic definitions you need to know to understand salaried, hourly, exempt, nonexempt, and salaried nonexempt employees. Except where noted, these employee classification definitions come from the U.S. Department of Labor.

FLSA Exempt: Under the Regulations Part 541, exempt employees are those who are not entitled to the minimum wage or overtime pay protections of the FLSA. This classification of an employee is often referred to as “salaried.”

FLSA Nonexempt: A nonexempt employee is one who is entitled to the minimum wage and/or overtime pay protections of the FLSA. This classification is often referred to as “hourly.”

Salaried Nonexempt: According to the Houston Chronicle, “salaried nonexempt employees receive a salary rate for a fixed number of hours.” Once (or if) they exceed that number of hours and work more than 40 hours in a week, they receive overtime compensation. The calculation of their overtime compensation is based on the equivalent hourly rate the employee earns.

Salary: A predetermined, fixed amount of pay that constitutes all or part of the employee’s compensation for the pay period. It may not be reduced based on the quality or quantity of the work performed. A salary is generally expressed as an amount paid per week, per month, or per year. Per Regulations Part 541, the employee must earn the minimum required salary of $455 per week “free and clear” or exclusive of “board, lodging, or other facilities.

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