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Increased Salary Requirements for FLSA Exemptions 2020

In September 2019, the United States Department of Labor updated the Fair Labor Standards Act (“FLSA”) by increasing the salary requirements necessary to qualify for certain overtime exemptions.  All employers must comply with the new increase effective January 1, 2020.

Under the FLSA there are certain categories of Executive, Administrative and Professional Employees who are exempt from the requirement that employees must be paid overtime at the rate of 1.5 times their regular hourly wage for all hours worked over 40 during any week.   Currently, if an employee performs duties set forth under the FLSA which satisfy the tests for Administrative, Professional or Executive Employees and they earn a salary of at least $455 per week, or $23,660 annually, an employer is not required to pay those employees overtime at the rate of time and one half the regular rate.   The last time the Department of Labor has updated the salary requirement was in 2004 and the current rates under the regulations are below the annual poverty rate.  This realization caused the Department of Labor to propose new regulations to increase the minimum salary requirements. 

Under the new rule effective in 2020, the salary threshold requirement to meet the exemptions will increase to $684 per week or $35,568 annually.  The new regulations also increase the salary requirement for the Highly Compensated Employee exemption from $100,000 to $107,432 per year. 

Finally, the new regulation permits an employer satisfy up to ten percent of the salary requirements through the use of nondiscretionary bonuses and incentive payments so long as they are paid at least annually.   An employer who uses the bonus and incentive payment to meet the salary threshold is permitted to make a catch-up payment at the end of the year if an employee does not earn enough to retain an exempt status.

Many employers will now have to reassess the exempt status of employees and increase the salary for some.  The failure to properly pay an employee all minimum wage and overtime due, even if an employer is unaware that it is improperly paying employees may result in substantial damages being assessed.  The statutory damages allowed per Maryland law are up to three times the unpaid wages, plus attorney’s fees incurred by the employee.  Furthermore, certain officers, directors, stockholders and supervisors who have a high level of financial control over a business may be held personally liable for all damages, including treble damages if an employer fails to properly pay employees.   



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