DOL Ruling Increases Salary Requried to Qualify as an “Exempt” Worker

DOL Ruling Increases Salary Requried to Qualify as an “Exempt” Worker

Arizona does not have specific overtime laws.  Instead, Arizona adheres to Federal law with respect to overtime pay requirements.  Recently, the Department of Labor issued a new ruling on the requirements to qualify as an “overtime exempt” worker.  On September 24, 2019, the DOL issued a ruling increasing the minimum salary required to qualify as an exempt worker from $455 weekly (or $23,660 annually) to $684 weekly (or $35,568).  This new rule takes effect January 1, 2020.

In addition to this increased salary amount, an employee will still need to satisfy the “duties tests” to be exempt from overtime.  These tests essentially create a few different categories of exempt employees, including: 1) administrative employees; 2) executive employees; 3) learned professional employees; 4) creative professional employees; 5) computer employees; and 6) outside sales employees.

See https://www.dol.gov/whd/overtime/fs17a_overview.pdf for a more detailed explanation of what each specific exemption requires.

The new ruling, however, does give employers a break in that it allows employers to use nondiscretionary bonuses and incentive pay such as commissions to satisfy up to 10% of the required salary amount.

Arizona employers that classify any employees as “exempt” should closely track the salary paid to these employees and closely scrutinize their job duties and requirements, including the amount of time the employee spends on work that qualifies under that specific exemption.  Misclassifying employees as “exempt” can have serious consequences since such classifications often impact many employees, potentially creating a large amount of potential liability.  Contact Tyson & Mendes if your company needs any assistance in determining whether any of your employees qualify as an “exempt” employee.

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