It’s About Time: New Overtime Rule Effective January 1, 2020
Earlier this week, the US Department of Labor (DOL) finally released its highly anticipated changes to the overtime provisions of the Fair Labor Standards Act (FLSA). This rule, which goes into effect on January 1, 2020, updates the minimum salary thresholds (previously set back in 2004) necessary to exempt executive, administrative, or professional employees from the FLSA’s minimum wage and overtime pay requirements. (The rule does not make any changes to the duties tests.) More specifically, the rule will:
Raise the salary level from the current $455 per week to $684 per week (or $35,568 per year for a full-year worker);
Raise the total annual compensation level for highly compensated employees from the current $100,000 per year to $107,432 per year;
Allow employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the salary level; and
Revise the special salary levels for workers in US territories and in the motion picture industry.
The DOL estimates this rule will make 1.3 million American workers eligible for overtime pay under the FLSA and calls this increase to the salary thresholds “long overdue in light of wage and salary growth since 2004.” The DOL reaffirms its intent to update the earnings thresholds more regularly based on its belief that “fixed earning thresholds become substantially less effective over time.”
For those frustrated by this increase, look at the bright side: these changes pale in comparison to the prior proposal from 2016, which nearly doubled the salary threshold to $913 per week (or $47,476 per year) and included automatic increases to the minimum salary every three years. For those unsure of what to do next, stay tuned for a more in-depth look at what this rule means for employers and the potential steps to prepare, as the deadline to comply is around the corner. And when all else fails, consult with your employment counsel.