On September 24, the U.S. Department of Labor’s final rule released the final rules increasing the minimum salary level for the Fair Labor Standards Act (FLSA) “white collar” exemptions from $455 to $684 per week.   Effective January 1, 2020:

• The salary threshold for “white-collar” raises to $684 a week or $35,568 (up from $455 a week or $23,660).
• For highly compensated employees (HCEs), it raises the annual compensation to $107,432 (up from $100,000 per year).
• The rule allows employers to use nondiscretionary bonuses and incentive payment (including commissions) paid at least annually to satisfy up to 10% of the standard salary level.
• Revises the special salary levels for workers in U.S. territories and the motion picture industries have been revised to $455 and $1043, respectively.

It will be important for employers to analyze the status of employees who earn below the new salary threshold but were previously exempt.  Employers will have to consider whether to reclassify those employees as nonexempt hourly workers or give them raises to bring them up to the new threshold.  If employees now classified as exempt are reclassified as nonexempt workers, employers should make sure the newly reclassified employees know what is expected of them as hourly workers.

The quiz below was developed by the law firm, Pautsch, Spognardi & Baiocchi Legal Group.

Answer each question as TRUE or FALSE:

1. Under the new DOL rules, if an employee makes over $35,568 per year, it is permissible to pay the employee on an hourly basis and not pay that employee overtime.
2. To be considered exempt under the “white collar” exemptions, under either the new rules or the old rules, the employee must supervise at least two other individuals.
3. Under the new rules, if an employee holds a professional degree, they can be classified as exempt even if they are not paid a salary of at least $35,568 per year.
4. Under the new rules, exempt employees, who are paid a salary of over $35,568 per year, can be “docked” pay on an “hour-by-hour” basis as long as careful records are kept and they have forms of paid leave to use for the docked time periods.
5. The FLSA has an overtime exemption for “inside sales” employees that remains unaffected by the new rules.
6. The FLSA has overtime and minimum wage exemption for “outside sales” employees that remain unaffected by the new rules.

ANSWERS:

1. FALSE, each of the “white collar” exemptions (“professional”, “administrative”, “executive”) from overtime require that the employee be paid on a “salary basis” in addition to the “duties” standards set for each. As noted below, the “salary basis” test does not apply to “inside” and “outside sales” exemptions.
2. FALSE, this is true and required for the “executive” exemption, but not for the “administrative”, “professional” and “inside” and “outside” sales exemptions.
3. FALSE, to qualify for the “professional” exemption, the employee must meet both the “salary” level test (now $35,568) and the “duties” and status requirements of the “professional” exemption, i.e., that the employee holds a professional degree and perform that work as their primary duty.
4. This can be done lawfully, but it may be inadvisable to do so as it may cause morale problems and can lead to suits if situations occur if “docking” occurs when the paid leave bank has been depleted.
5. Under federal law, the inside sales exemption applies to employees who earn more than 150% of the minimum wage, derive at least 50% of their income from commissions, and work within the “retail and service industry” as defined under the FLSA.
6. Under federal law, an employee who qualifies for this exemption is exempt from both the minimum wage and overtime premium requirements.  The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer and the employee must be customarily and regularly engaged away from the employer’s place or places of business.  The salary requirements of the regulation do not apply to the outside sales exemption.

Spognardi Baiocchi LLP, a law firm dedicated to partnering with companies of all sizes to find solutions for labor, employment, human resources, and general business needs.  www.psb-attorneys.com.

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