United States Department of Labor Issues Final Rule Concerning Minimum Salary Threshold For Exemptions from Overtime Under the Fair Labor Standards Act
On September 24, 2019, the U.S. Department of Labor announced a final rule to make an additional 1.3 million workers eligible for overtime pay under the Fair Labor Standards Act (“FLSA”).
The FLSA requires that most employees be paid at least the federal minimum wage for all hours worked and time and one-half for all hours worked over forty hours per week. There are exemptions from the minimum wage and overtime requirements, including the executive, administrative and professional exemption. To qualify for the executive, administrative and professional employee exemption, employees generally must be paid on a salary basis, meet the applicable earnings threshold and meet certain tests with regard to their job duties.
The recently adopted final rule raisesupdates the minimum level of earnings thresholds necessary for to employees to be deemed exempt as executive, administrative and professional employees fromunder the FLSA’s minimum wage and overtime pay requirements. The final rule also , and allows employers to count a portion of certain bonuses/commissions awarded to an employee towards meeting the minimum salary thresholds for exemptionlevel. Employees making less than the new salary thresholds are entitled to overtime pay at one and one-half times their regular hourly rate of pay for hours worked in excess of forty (40) in a workweek. A regular hourly rate of pay can be calculated even if an employee is paid a salary, a flat rate or other method that is not hourly pay.
The new, higher earnings thresholds are intended to account for growth in employee earnings since the thresholds were last updated in 2004.
In the final rule, the Department is:
• raising the “standard salary level” from the currently enforced level of $455 per week to $684 per week (equivalent to $35,568 per year for a full-time employeeyear worker);
• raising the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year;
• allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices; and
• revising the special salary levels for workers in U.S. territories and the motion picture industry.
The final rule is effective on January 1, 2020.
It is recommended that employers prepare for this change by reviewing and adjusting employee salaries to ensure that they meet the new earnings thresholds for the exemptions, and reviewing employee job duties to ensure that they meet the job duties portion of the exemption analysis.