U.S. Department of Labor Issues Final Overtime Rule

On September 24, 2019, the U.S. Department of Labor announced its Final Rule on overtime exemptions under the Fair Labor Standards Act (FLSA). The new rule takes effect January 1, 2020.

The Rule increases the salary threshold necessary to exempt executive, administrative, or professional employees from the FLSA’s minimum wage and overtime pay requirements from $455 ($23,660 annually) to $684 per week ($35,568) annually. It also allows employers to count a portion of certain nondiscretionary bonuses and commissions towards meeting that salary level.

Additionally, the total annual compensation level for exempting highly compensated employees (HCE) was increased from the currently-enforced level of $100,000 to $107,432 per year.

The new salary thresholds basically just reflect growth in employee earnings since they were last updated in 2004.

What should employers do now?

To plan for the January 1 change, employers should review their payroll data to ascertain whether any employee currently classified as exempt is being paid less than the new requisite amount set forth above. If so, the employer should weigh the financial impact of increasing the salary to the new threshold, or reclassifying the employee as non-exempt (which of course would mean eligibility for overtime pay).

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