On September 24, 2019, the U.S. Department of Labor (DOL) announced its final rule updating 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. According to the DOL's press release, "[t]he increases to the salary thresholds are long overdue in light of wage and salary growth since 2004," and the DOL estimates that 1.3 million additional workers will be entitled to minimum wage and overtime pay as a result of the new regulations.
The DOL's final rule creates four key changes:
- It raises the "standard salary level" from the current level of $455 per week ($23,660 per year for a full-year worker) to $684 per week ($35,568 per year for a full-year worker);
- It raises the total annual compensation requirement for "highly compensated employees" from the current level of $100,000 per year to $107,432 per year;
- It allows employers to use nondiscretionary bonuses and incentive payments, including commissions, paid at least annually to satisfy up to 10% of the standard salary level; and
- It revises the special salary levels for workers in U.S. territories and the movie industry.
The final rule becomes effective on January 1, 2020. As we previously reported, the U.S. District Court for the Eastern District of Texas had issued a nationwide injunction on a 2016 version of the rule and subsequently invalidated that proposed version. Although the new rule may be challenged, employers should prepare to be in compliance at the beginning of next year. To this end, employers may wish to consult the Fact Sheet and FAQs the DOL has promulgated. Likewise, employers should be mindful of state overtime rules that may still remain above the new salary thresholds.
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