Ushering in 2020 means setting lofty resolutions to get more organized, be healthier, and comply with the U.S. Department of Labor’s (“DOL”) two new regulations that take effect this month.
New FLSA Minimum Salary Threshold Increase
If you have salaried employees earning less than $35,568 per year, regardless of their duties, those employees are likely no longer exempt. Effective January 1, 2020, the minimum salary threshold for the Fair Labor Standards Act (“FLSA”) white-collar exemptions increased to $684 per week or the equivalent of $35,568 per year. Additionally, the minimum salary threshold increased for “highly compensated employees” from $100,000 to $107,432 per year. However, employers are now allowed to use incentive payments—including commissions and certain non-discretionary annual bonuses—to account for up to 10% of the employee’s salary level.
As a refresher, the federal overtime provisions of the FLSA require that employers must provide overtime pay for hours worked over 40 in a workweek unless an overtime exemption applies. For an exemption to apply, an employee’s primary job duties and salary must meet certain minimum requirements. Since 2004, the minimum salary for the so-called “white-collar exemptions”—some of the most commonly used exemptions—has been $455 per week or the equivalent of $23,660 per year. In September 2019, the DOL released a final rule setting a new minimum salary threshold ($35,568) for the FLSA white-collar exemptions.
Calculating Your Employees’ Regular Rate of Pay
The DOL recently released a final rule—effective January 15, 2020—clarifying that certain perks and benefits may be excluded from the “regular rate” of pay calculation. The final rule should help employers that were confused about which perks or benefits may be excluded when calculating an employee’s regular rate of pay.
Under the FLSA, non-exempt employees must be paid at least 1.5 times their regular rate of pay for all hours worked over 40 in a workweek. The regular rate of pay includes “all remuneration” paid to the employee, with the exception of certain statutorily-excluded payments.
The DOL’s final rule confirms that the following perks, benefits and bonuses can be excluded from the regular rate of pay calculation:
Certain parking benefits, wellness programs, onsite specialist treatment, gym access and fitness classes, employee discounts on retail goods and services, certain tuition benefits, and adoption assistance;
Unused paid leave, including paid sick leave or paid time off;
Certain penalties required under state and local scheduling laws;
Reimbursed expenses including cellphone plans, credentialing exam fees, organization membership dues, and travel, even if not incurred “solely” for the employer’s benefit; and clarifies that reimbursements that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System or the optional IRS substantiation amounts for travel expenses are per se “reasonable payments”;
Certain sign-on bonuses and certain longevity bonuses;
Office coffee and snacks to employees as gifts;
Discretionary bonuses, by clarifying that the label given a bonus does not determine whether it is discretionary and providing additional examples; and
Contributions to benefit plans for accidents, unemployment, legal services, or other events that could cause future financial hardship or expense.
Although the final rule helps clarify which employee-related costs may be excluded from the regular rate of pay, there remains significant liability for employers who miscalculate the regular rate of pay.
Contact info: Meredith S. Campbell Chair, Employment and Labor Group, Shulman Rogers firstname.lastname@example.org | T 301.255.0550 | F 301.230.2891