The white-collar exemption now applies to employees who receive a salary of at least $35,568 per year or $684 per week.
Before the Department of Labor (DOL) revised the Fair Labor Standards Act (FLSA) in September 2019, salaried employees who earned at least $23,660 per year were exempt from the FLSA’s minimum wage and overtime pay requirements.
What’s the overtime and minimum wage rule?
The FLSA requires employers to pay their employees the federal minimum wage – $7.25 per hour – for all the hours they work.
And, it requires employers to pay their employees overtime if they work more than 40 hours in a single workweek. Employees receive time and one-half (150%) of their regular pay rate for each hour of overtime they work.
So, what’s the white-collar exemption?
It’s a rule that allows certain types of employees to be exempt from FLSA’s overtime and minimum wage provisions. They don’t earn any overtime and aren’t subject to the minimum wage requirement – although they typically make more than the federal minimum wage.
It benefits employers because they can cap how much they pay certain types of employees.
Here’s how the exemption works.
Staff categorized as an executive, administrative, professional, or outside sales employee may be exempt from the rule if they meet specific job requirements and earn a salary of at least $35,568 per year. Each position – executive, administrative, professional, and sales – has its own job requirements it must satisfy, as well as the salary threshold, to qualify for the exemption.
If individuals fail to meet all their job requirements or the salary threshold, they’re nonexempt. If they meet all the job requirements and the salary threshold, they’re exempt.
Let’s use executives as an example. To claim the executive exemption, an executive must make at least $35,568 per year, manage at least two full-time employees, manage the enterprise, and have the ability to fire and hire other employees.
Remember, a job title doesn’t automatically make an employee exempt.
When does the new salary threshold take effect?
This rule goes into effect on Jan. 1, 2020. As an employer, you should prepare ahead of time to ensure you’re following the revised law by that date.
What do employers have to do to prepare?
1. Confirm your employees are correctly classified – nonexempt or exempt.
Misclassifying employees can be a costly mistake, so make sure you pay close attention to each employee’s classification.
- Exempt – employees aren’t entitled to overtime pay
- Nonexempt – employees are entitled to overtime pay
2. Review your exempt employees’ salaries.
Do you need to make adjustments to meet the new salary threshold – $35,568 – by Jan. 1, 2020?
3. Make the appropriate changes in your payroll system or contact your payroll provider to make the changes.
Looking for a payroll provider who can help you comply with this new rule? We can help!