U.S. Department of Labor Issues Final Overtime Rule

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). The final rule updates the earnings thresholds necessary to meet the White Collar Exemptions (exempt executive, administrative, or professional employees) 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.

The final rule provides the following:

  • 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 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 the U.S. territories and in the motion picture industry.

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 Department estimates that workers will receive an additional $298.8 million in extra pay each year once the rule is implemented.

In anticipation of the change becoming effective on January 1, 2020, employers should consider the following:

  • raising the salary of employees who meet the White Collar Exemptions test to $35,568 per year to obtain their exempt status;
  • pay non-exempt status workers the overtime premium of 1.5 times the employees’ regular pay rate for all overtime hours worked
  • eliminate or reduce the amount of overtime hours worked by all non-exempt status workers

Please contact us if you need additional guidance or information regarding the new rule or compliance with state and federal wage and hour laws.