U.S. Department of Labor Issues Final Overtime Rule

September. 25, 2019

The U.S. Department of Labor (the “Department”) has issued a final rule to expand worker eligibility for overtime compensation under the Fair Labor Standards Act (“FLSA”). The final rule increases the earnings threshold required 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.

Specifically, the final rule makes the following key changes:

• Increases the standard salary level from $455 to $684 per week (equivalent to $35,568 per year);

• Raises the minimum compensation for highly compensated employees from $100,000 to $107,432 per year;

• Allows employers to use non-discretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level; and

• Revises the special salary levels for workers in U.S. territories and in the motion picture industry.

Note: If an employee does not earn enough in non-discretionary bonuses and incentive payments (including commissions) in a given 52-week period to retain their exempt status, the final rule allows employers to make a “catch-up” payment at the end of the 52-week period. If the employer chooses not to make the catch-up payment, the employee would be entitled to overtime pay for any overtime hours worked during the previous 52-week period.

Employers may not, however, use non-discretionary bonuses and incentive payments (including commissions) to satisfy the salary threshold for highly compensated employees.

Although the Department declined to adopt a mechanism that would automatically update the salary threshold in the future, it stated its intent to update the regulations more consistently.

The final rule takes effect January 1, 2020. 

For more information contact

Allyson Kurker or Margaret H. Paget at Kurker Paget LLC.