U.S. Department of Labor Final Overtime Rule

Effective January 1, 2020, nearly 1.3 million American workers will be newly eligible for overtime pay.

The U.S. Department of Labor enacted the final Overtime Rule which updates the earnings thresholds necessary to exempt executive, administrative and professional employees from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements. It allows employers to count a portion of certain bonuses/commissions towards meeting the salary level. The new thresholds account for growth in employee earnings since the thresholds were last updated in 2004.

The impact of the Labor Department’s rule includes:

  • 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-year 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.

Employers should consider auditing their wage practices to ensure that, come the new year, all non-exempt employees are being properly paid overtime to avoid high-penalty FLSA claims.

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