As has been widely reported, on January 1, 2020, the salary threshold for an employee to qualify for the executive, administrative, and professional (“EAP”) exemptions to the overtime requirements of the Fair Labor Standards Act increased to $684 per week, or $35,568 annually. This is a significant increase from the previous threshold, which was $455 per week, or $23,660 annually. The threshold for the “highly compensated employee” exemption also increased from $100,000 to $107,432 per year. The Department of Labor released its final rule concerning these changes to the overtime exemptions on September 24, 2019, so companies across the country were busy in the last quarter of 2019 evaluating their compensation levels for employees who were designated under the EAP exemptions and, in some cases, making appropriate adjustments—either to employees’ compensation or classification.
Given the emphasis in the media coverage on the changes to the salary requirements, some companies might have assumed that salary level was the only thing they needed to consider. The salary level test is only one piece of the EAP exemption puzzle, however. Each of the EAP exemptions also has an associated job duties test that must be met in order for an employee to be eligible. In other words, regardless of salary level, if the duties tests are not met, the employees are not exempt. Importantly, the DOL’s new rule did not alter this part of the analysis. The duties tests for EAP exemptions have not changed and must be met. Thus, some companies might have increased compensation levels for employees who could still be found to be non-exempt if their duties were scrutinized.
If not already a part of their review process in 2019, companies would be wise to spend some time this month reviewing the job descriptions and actual duties of their employees to ensure that they meet the duty requirements for an EAP exemption. As job roles can evolve over time, employees who might have qualified under the duties test initially might no longer be eligible. If particular employees are found not to meet the duties test for an EAP exemption, employers should follow through with reclassifying such workers as non-exempt and pay appropriate overtime.
Have questions about the actions you should take? Contact a member of the Hirschler Employment Law Team.