For the first time since 2004 the U.S. Department of Labor announced a final rule to make 1.3 million American workers eligible for overtime pay under the Fair Labor Standards Act (FLSA).
Effective on January 1, 2020 (barring any changes or litigation), the final rule updates the earnings thresholds necessary for employees to qualify for the exemption as an executive, administrative, or professional employee from the FLSA's minimum wage and overtime pay requirements, and allows employers to count a portion of certain bonuses (and commissions) towards meeting the salary level.
In the final rule, the DOL is:
* Raising the "standard salary level" from the currently enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker);
* Raising the total annual compensation level for "highly compensated employees (HCE)" from the currently-enforced level of $100,000 to $107,432 per year;
* Allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level, in recognition of evolving pay practices; and revising the special salary levels for workers in U.S. territories and in the motion picture industry.
The DOL estimates that 1.2 million additional workers will be entitled to minimum wage and overtime pay as a result of the increase to the standard salary level. The Department also estimates that an additional 101,800 workers will be entitled to overtime pay as a result of the increase to the HCE compensation level.
The Final Rule by the Numbers:
$684 per week – salary requirement – up from the currently enforced level of $455/week (level is equivalent to $35,568 per year)$107,432 – total HCE compensation threshold – up from the currently enforced level of $100,000 annually10% – amount of the standard salary level the final rule allows employers to cover with nondiscretionary bonuses and incentive payments that are paid annually or more frequently1.3 million – estimated number of currently exempt workers who the Department estimates will, without intervening action by their employers, become eligible for overtime$298.8 million – estimated amount of extra pay workers will receive each year$455/week – special salary level for workers in Puerto Rico, U.S. Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands$380/week – special salary level for workers in American Samoa$1,043/week – “base rate” threshold for employees in the motion picture industry
The DOL’s final rule is available at https://www.dol.gov/whd/overtime2019/index.htm.
Meeting the salary threshold doesn't automatically make an employee exempt from overtime pay; the employee's job duties also must primarily involve executive, administrative or professional duties as defined by the regulations.
Employers should immediately pull data for exempt workers earning close to the proposed cutoff and evaluate the pay structure for any exempt-classified employees earning less than the proposed threshold. Review your budgets and job descriptions and consider what positions you might restructure, flag whom you might reclassify to nonexempt or give a salary increase, and determine when you should implement changes.
Contact Rothmeyer Rothmeyer Corp. today to schedule a free consultation. We can assist you with determining the overtime eligibility of your employees and will guide you on your compliance strategies.