Final Rule: Overtime Update

FINAL RULE: OVERTIME UPDATE

ON SEPTEMBER 24, 2019, THE U.S. DEPARTMENT OF LABOR ANNOUNCED A FINAL RULE TO MAKE 1.3 MILLION AMERICAN WORKERS NEWLY ELIGIBLE FOR OVERTIME PAY.

The Department of Labor (“DOL”) has finally issued a final rule on the changes to the FLSA overtime rules (effective January 1, 2020). The new rule increases the annual threshold to $35,568 ($684/week) regardless of function of function or responsibility (current threshold is $23,660). If the employee does not meet the salary threshold, then he/she must be paid 1 ½ times hourly pay for hours worked over 40 in a week.

As a reminder, even if the employee exceeds the salary threshold, the employee’s position must be evaluated (“duties test”) to determine if any of the three exemptions apply. The DOL also increased the salary threshold for highly compensated employees to $107,432. The duties test for employees that exceed this annual salary threshold are less rigid. The net result is that there are effectively four exemptions that can apply to remove an employee from the overtime obligation: (a) earn annual salary of at least $35,568 and meet one of the three white collar exemptions or (b) earn annual salary of $107,432 and meet less rigid duties test for highly compensated employees. Also, it’s important to remember that up to 10% of the salary threshold can be met using non-discretionary bonuses and commissions.