Final Overtime Rule Issued, Takes Effect January 1, 2020

On Sept. 24, 2019, the U.S. Department of Labor (DOL) announced a new final rule that updates the salary thresholds that some individuals must meet in order to qualify for a minimum wage and overtime exemption under the federal Fair Labors Standards Act (FLSA). The final rule becomes effective on Jan. 1, 2020.

The final rule is slated 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 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 new thresholds account for growth in employee earnings since the currently enforced thresholds were set in 2004.

In the final rule, the Department 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 final rule will be effective on January 1, 2020.

Finally, the rule also makes changes to the standard salary level for the exemption that applies to employees in the motion picture industry and some U.S. territories.

The DOL intends to update the standard salary and highly compensated employee total annual compensation levels more regularly in the future through notice-and-comment rulemaking.

More information about the final rule is available at https://www.dol.gov/whd/overtime2019/.

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