The New Year brings with it three new wage requirements impacting employers and employees. Here’s the rundown.
FLSA Salary Requirement for “White Collar Exemptions” Increases Effective January 1, 2020
To be correctly classified as exempt under certain “white collar” exceptions under the Fair Labor Standards Act (FLSA), employers must meet two tests: a) minimum salary requirement; and b) job duties requirements. For most exempt classifications, the current minimum salary threshold is $23,660 per year (or $455 per week) and has been for many decades. The U.S. Department of Labor (DOL) has increased this minimum salary requirement to $35,568 (or $684 per week), effective January 1, 2020.
The new regulations will also:
- Increase the salary threshold for employees meeting the highly compensated employee classification from $100,000 to $107,432. Generally speaking, employees meeting the minimum annual compensation for highly compensated employees have a less restrictive duties test.
- Allow employers to count nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary level test, as long as such payments are paid annually or more frequently
- Maintain the current minimum annual salary level of $23,660 for employees in the US territories of Guam, Puerto Rico, the U.S. Virgin Islands, and the Northern Mariana Islands and of $19,760 for employees in American Samoa
Now is the time Employers should be reviewing their exempt employees’ salaries to determine what changes, if any, may be necessary prior to the January 1, 2020 effective date. Employers may need to:
- Raise the salary of employees who meet the duties test to at least $35,568 annually to retain their exempt status;
- Convert employees to non-exempt status and pay the overtime premium of one-and-one-half times their regular rate of pay for all overtime hours worked; or
- Convert employees to non-exempt status and eliminate or reduce the amount of overtime hours worked by such employees
Although no automatic increases were included in the regulations going forward (as they had been in the prior version), the DOL indicated that it intends to update the salary thresholds more regularly in the future through notice-and-comment rulemaking.
Colorado Minimum Wage Increase
In 2016, voters passed Amendment 70, which increased Colorado’s minimum wage over a 3-year period. Effective January 1, 2020, Colorado employers must pay the new minimum wage of $12 per hour to any of its employees who are paid minimum wage. Although the federal minimum wage is lower than the state minimum wage, the Fair Labor Standards Act specifically mandates that if a state has a different minimum wage than federal law, the employer must pay the higher wage. For employers in Denver, please see below.
Denver City Council Increases Minimum Wage
In November, the Denver City Council unanimously voted to adopt a minimum wage higher than the State minimum wage of $12 per hour. Mayor Hancock signed the ordinance into law two days later. Such change is pursuant to HB-1920 which allows local government jurisdictions to adopt a minimum wage different than that outlined in Amendment 70. Denver is the first such jurisdiction to take this action. Under the new law, the city’s minimum wage will increase as follows: $12.85 an hour starting Jan. 1, 2020; $14.77 an hour on Jan. 1, 2021; and $15.87 an hour on Jan. 1, 2022. After that, the minimum wage will be adjusted each year based on the Consumer Price Index.
Pursuant to HB-1920, this higher minimum wage must also be paid to ANY employee who works 4 hours or more in a jurisdiction where a local government has adopted a higher minimum wage. This does not include time spent by an employee solely for the purpose of traveling through the local government’s jurisdiction with no employment-related stops in local jurisdiction except for refueling or employee’s personal meals or errands. As such, employers outside of Denver will need to pay the higher wage for any hours where their employees spend 4 hours or more engaged in work within Denver city limits.
Michelle B. Ferguson is an employment law attorney at Ireland Stapleton Pryor & Pascoe and leads the firm’s employment law practice group. She focuses on finding ways to keep employers out of court by being proactive in identifying and solving employment issues before a claim is filed. Ms. Ferguson counsels employers and governmental entities on all matters of employment law and day-to-day personnel issues and represents her clients in all types of administrative claims and litigation before federal and state courts.
What is written here is intended as general information and is not to be construed as legal advice. If legal advice is needed, you should consult an attorney.