The Department of Labor (DOL) has announced that employees who make less than $35,568 are now eligible for overtime pay under a final rule issued on September 24, 2019.
To be exempt from overtime under the federal Fair Labor Standards Act, employees must be paid a salary of at least the threshold amount and meet certain duties tests. If they are paid less or do not meet the tests, they must be paid 150% (“time and a half”) their regular hourly rate for hours worked in excess of 40 in a workweek. The new rule will raise the salary threshold to $684 a week ($35,568 annualized) from $455 a week ($23,660 annualized). You may remember that a 2016 rule change was proposed which would have doubled the threshold, but a federal judge held that the DOL exceeded its authority by raising the rate too high and the matter has been in limbo since that time.
The final rule updates the earnings thresholds necessary to exempt executive, administrative and professional employees from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements, and allows employers to count a portion of certain bonuses/commissions towards meeting the salary level. The new thresholds account for growth in employee earnings since the thresholds were last updated in 2004.
The final rule:
- raises the “standard salary level” from the currently enforced level of $455 per week to $684 per week (equivalent to $35,568 per year for a full-year worker);
- raises the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year; and
- allows employers to use non-discretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices.
As in 2016, this final rule is currently pending and then final version of the rule may vary slightly. However, it is time to examine your employee compensation to see which, if any, employees may be affected by this rule change and take the steps necessary to prepare for the change which is scheduled to take effect on January 1.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.