On September 24, 2019, the USDOL announced a final rule to make more American workers newly eligible for overtime pay. The USDOL’s rule will raise the minimum earnings threshold which is otherwise necessary to exempt certain executive, administrative, and professional employees from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements. It also allows employers to count a portion of certain bonuses/commissions towards meeting the salary level.
The new rule will become effective starting January 1, 2020. The rule specifically:
- raises the “standard salary level” from the current 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 level for “highly compensated employees (HCE)” from the current level of $100,000 to $107,432 per year; and
- allows employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to ten percent (10%) of the standard salary level, in recognition of evolving pay practices.
The USDOL 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 USDOL 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. Please also see the link to the USDOL’s FAQ website to questions regarding the updated rule.
As a reminder, to qualify for an exemption to this rule an employee generally must:
- be salaried, meaning that they are paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed;
- be paid at least a specified weekly salary level, which is $684 per week (the equivalent of $35,568 annually for a full-year worker) under this final rule; and
- primarily perform executive, administrative, or professional duties, as defined in the USDOL’s regulations (the “duties test”).
Please contact any of the attorneys in our Labor & Employment practice group, listed below, should you need additional support or guidance regarding the update.