standard for exempt status is set at twice its minimum wage. Due to statutory annual increases, California’s minimum salary level for
exempt status will exceed the FLSA standard beginning January 1, 2019, with an annual rate of $49,920 ($960 per week).
Next Steps
The new DOL rule will require that some employees either receive salary increases to meet the new standards or be reclassified to non
exempt status. If employees are reclassified to nonexempt status, employers should consider whether to retain salaried status while
paying overtime when required or to convert employees to hourly pay.
In those states where it is permissible to do so, employers may want to consider utilizing the “fluctuating workweek” method of payment to
control overtime costs for salaried nonexempt employees. Use of this methodology can result in overtime costs of less than onethird the
level that would apply to an hourly employee with the same base rate.
Regardless of whether employees who are reclassified as nonexempt remain salaried or are converted to hourly pay status, employers
will need to consider what base rate to use, including whether to take expected overtime into account in setting the base rate.
To the extent that employers use bonuses or commissions to help satisfy the minimum salary threshold, they need to ensure that the
bonus or commission plan meets the requirements under the new rule.
Employers will also need to ensure that they maintain proper time records for any reclassified employees (as well as all other nonexempt
employees). In doing so, employers need to be careful to ensure that all time worked is counted, including offhours work activities, such as
responding to workrelated emails.
Finally, employers may also consider steps to restrict overtime work to control overtime pay obligations.
For any questions on the DOL’s new rule, please contact a member of Goodwin Procter’s Labor & Employment Practice.
Author: Robert M. Hale
GET IN TOUCH
For more information about the contents of this alert,
please contact:
Robert Hale
Partner
+1 617 570 1252
rhale@goodwinprocter.com
© 2016 Goodwin Procter LLP. All rights reserved. This informational piece, which may be considered advertising under the ethical rules of
certain jurisdictions, is provided with the understanding that it does not constitute the rendering of legal advice or other professional advice
by Goodwin Procter LLP, Goodwin Procter (UK) LLP or their attorneys. Prior results do not guarantee similar outcome.
Goodwin Procter LLP is a limited liability partnership which operates in the United States and has a principal law office located at 53 State
Street, Boston, MA 02109. Goodwin Procter (UK) LLP is a separate limited liability partnership registered in England and Wales with
registered number OC362294. Its registered office is at Tower 42, 25 Old Broad Street, London EC2N 1HQ. A list of the names of the
members of Goodwin Procter (UK) LLP is available for inspection at the registered office. Goodwin Procter (UK) LLP is authorized and
regulated by the Solicitors Regulation Authority.
2
.