Department of Labor Issues Final Rule Expanding Overtime Eligibility for Workers Effective January 1, 2020

Today, September 24, 2019, the Department of Labor issued the long-awaited final rule making an estimated 1.3 million workers eligible for overtime pay.

The final rule increases the minimum earnings required for employees to qualify for executive, administrative, and professional exemptions under the Fair Labor Standards Act (FLSA), and specifically:

  • Raises the minimum salary levels for overtime exemptions from $455 to $684 per week or a minimum of $35,568 per year.
  • Increases the total compensation required for the “highly compensated employee” exemption from $100,000 to $107,432 per year.
  • Allows employers to use nondiscretionary bonuses and incentive payments (including commissions) which are paid at least annually to count toward up to 10% of the minimum salary requirements.

Employers had previously braced for far higher increases in 2016, when the Labor Department doubled the salary threshold to $47,476. A federal judge blocked that increase in Texas in 2017, which sent the Department of Labor back to the drawing board to find a compromise.

The result is a more modest increase to the salary thresholds and the elimination of automatic increases, with the Department instead committing only to updating the salary thresholds “more regularly in the future.” The final rule makes no changes to the duties tests required for exemption.

Employers have until January 1, 2020, to ensure their compliance with the new rule. Now is the time to begin reviewing employee compensation levels to determine whether to increase salaries for exempt employees who fall below the threshold or convert employees to non-exempt status. This is also a good time for employers to revisit existing exemptions to ensure that they comply with the new salary thresholds and the applicable duties tests.

Business groups have been anticipating these changes and have expressed concern that broadening coverage of the FLSA overtime rules may lead to additional litigation, as FLSA lawsuits continue to plague employers large and small.

CGA Law Firm suggests that employers proceed cautiously when implementing these changes. Our attorneys are available to assist with interpreting the final rule, assessing the costs related to compliance, and ensuring that all employees meet both salary and duties requirements.

Please contact Christine Nentwig cnentwig@cgalaw.com or Zachary Nahass znahass@cgalaw.com.

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