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In recent years, the status of the federal overtime exemption rule has been uncertain due to proposed changes by the Obama administration, ensuing court challenges, and review by the Trump administration. Finally, on September 24th, the U.S. Department of Labor (DOL) announced its final rule, which will take effect on January 1, 2020. Under that rule, workers must be paid a salary of at least $35,568 per year to qualify for one of the white-collar exemptions under the Fair Labor Standards Act (FLSA). This is an increase from the current salary threshold of $23,660, but is less than the Obama administration’s proposed $47,476 requirement.

The most common white-collar exemptions are for executive, administrative, and professional employees. In order to qualify for these exemptions, an employee needs to satisfy the salary requirement plus certain tests regarding job duties. There is also an exemption for “highly compensated” workers, who under the new rule must earn at least $107,432 in total annual compensation and perform office work and one of the exempt duties of an exempt executive, administrative or professional employee. Workers who qualify for these white-collar exemptions are not subject to overtime rules under the FLSA.

The DOL’s increase of the salary threshold will mean that fewer employees will qualify for the overtime exemptions. In preparation for the rule, employers should review the exemption status of their employees and identify any who are currently exempt but will not earn at least $35,568 as of January 1, 2020.

Please contact any of the lawyers in RQ&N’s Employment Section if you have questions about the DOL exemption rule.

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