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You may recall that in 2016 the Obama Administration proposed changes to the Fair Labor Standards Act’s (FLSA) minimum salary thresholds for exempt positions. These changes more than doubled the minimum threshold and impacted many of our nonprofits in the state. At the eleventh hour, the proposed changes were enjoined by the U.S. District Court in Eastern Texas days before they went into effect. It didn’t end there, but the changes were halted.
Following new proposed changes and a public comment period earlier this year, the final rule was issued this week for changes that go into effect on January 1, 2020.
Is there an increase to the minimum threshold for exempt employees? Yes. This federal ruling increases the minimum weekly threshold to exempt positions from $455 ($23,660 per year) to $684 ($35,568 per year). The exemption for Highly Compensated Employees (HCE) is also increasing from $100,000 annually to $107,432 per year.
Is the increase as significant as the 2016 proposed changes? No, not even close. In fact, because the changes are less dramatic, they impact fewer Alaska’s nonprofits. Why? Simply put, minimum thresholds for Alaska Wage and Hour still exceed the federal minimum even with the increase issued this week. Alaska Wage and Hour applies to Alaska employers with four or more employees whereas FLSA, a federal law, applies to ALL Alaskan employers, including those with three or fewer employees. There is also a difference between how the federal and state minimum thresholds are determined. A specific dollar amount per week is established under the FLSA. However, Alaska Wage and Hour’s minimum threshold is calculated as twice the state’s hourly minimum wage. Currently, Alaska’s minimum wage is $9.89 per hour, thus the minimum threshold for exempt classification is $791.20 per week under Alaska Wage and Hour.
What does my organization need to do? Although these changes do not impact all nonprofit employers in the state, this is a reminder to verify classifications are correct and that exempt employees meet the three factor test for determining exempt classification: 1) they are paid the minimum weekly threshold, 2) they are paid on a salary basis, and 3) the position satisfies the duties and responsibility requirements.