On 9/24/19, the Department of Labor announced an increase in the threshold for the earnings requirement of nonexempt workers. Effective January 1, 2020, employers must pay their employees a minimum of $684 per week (up from $455 per week), which is equivalent to $35,568 per year.
The new rule allows for up to 10% of an employee’s earnings to come from nondiscretionary bonuses and incentive payments, including commissions, to satisfy the threshold requirement (standard salary level). In order for nondiscretionary bonuses and incentive payments to count in the calculation, they must be paid on at least an annual basis. In addition, the highly compensated employee exemption threshold will increase from $100,000 to $107,432 per year.
Employers must review your exempt employees’ current salary levels to understand what salary increases need to be made by the end of the year or switch salaried employees whose salaries don’t meet the requirement to nonexempt (hourly) employees. Nonexempt employees then become eligible for overtime pay. In addition, employers should review your job descriptions for all your roles to ensure they qualify for one of the Fair Labor Standards Act’s executive, administrative, or professional exemptions.