On Tuesday, September 24, 2019, the Department of Labor (DOL) released the long awaited final rule on overtime, which will take effect January 1, 2020. Employees who make less than $35,658 per year will now be eligible for overtime pay. To be exempt from overtime under the Fair Labor Standards Act (FLSA), employees must be paid a weekly salary of at least $684, up from the previous weekly amount of $455. The DOL did not, however, make any changes to the duties test. In addition, the DOL did not enact automatic adjustments to the salary threshold, nor did it create differing salary levels based on region or size of employer. Meeting the salary threshold does not alone make an employee exempt. The employee must remain engaged in executive, administrative, or professional duties, or be part of another exempt status.
Under the new rule, nondiscretionary bonuses and incentive payments (including commissions) paid on an annual or more frequent basis may be used to satisfy up to 10 percent of the standard salary level.
In addition to raising the salary cutoff for exempt workers, the new rule raises the threshold for highly compensated employees from $100,000 a year to $107,432 (of which $684 must be paid weekly on a salary or fee basis). The increase is about $40,000 less than what the DOL initially proposed because it is based on the 80th percentile, rather than the 90th percentile, of all full-time salaried workers’ earnings nationwide.
For the FLSA’s executive, administrative and professional exemptions—the so-called white-collar exemptions—employees must perform certain duties and earn at least the salary threshold. But under a special rule, highly compensated employees are eligible for exempt status if they meet a reduced duties test as follows:
- The employee’s primary duty must be office or non-manual work.
- The employee must “customarily and regularly” perform at least one of the bona fide exempt duties of an executive, administrative or professional employee.
The DOL’s Fact Sheet: Final Rule to Update the Regulations Defining and Delimiting the Exemptions for Executive, Administrative, and Professional Employees is available here: https://www.dol.gov/whd/overtime2019/overtime_FS.htm
If you have questions about an employee’s exempt/non-exempt status or how this final rule will impact your business, please give us a call.