After more than 15 years, the U.S. Department of Labor (DOL) is updating the overtime regulations under the Fair Labor Standards Act (FLSA). The FLSA entitles most employees to minimum wage and overtime pay for all hours worked over 40 in a workweek. However, employees who meet the salary threshold and the relevant duties test qualify for the executive, administrative, professional exemption (white collar exemption), and are not entitled to overtime pay. On Sept.24, 2019, the DOL issued a news release announcing its final rule regarding overtime regulations.
Effective Jan. 1, 2020, the new salary threshold for white collar exemptions will increase to $684 per week, which is the equivalent of $35,568 per year for a full-time employee. Currently, the salary level is set at $455 per week ($23,660 annually for a full-time employee).
In addition to the increased salary threshold, the final rule:
- Raises the annual compensation level for “highly compensated employees” to $107,432 per year, up from the currently-enforced $100,000 amount
- Allows employers to include nondiscretionary bonuses and incentive pay (including commissions) paid at least annually to account for up to 10 percent of the salary threshold
- Revises the special salary levels for employees in U.S. territories and the motion picture industry
According to the DOL, these changes will mean 1.3 million additional American workers are eligible for overtime pay under the FLSA. The DOL notes that the “increases to the salary thresholds are long overdue in light of wage and salary growth since 2004.”
A previous rule issued under the Obama Administration in 2016 was blocked by a federal judge before the rule could go into effect. The 2016 rule was more expansive than the 2019 final rule announced on Sept. 24, 2019.
For full-time employees with salaries below $35,568, employers will need to consider whether to implement salary increases to ensure the salary threshold for white collar exemptions is met or to convert those employees to non-exempt status. Conversion would require those employees to track their hours and make them eligible for overtime pay. This is also a good time for employers to review job descriptions to ensure they accurately reflect the work performed and to ensure those duties still qualify under one of the white collar exemptions for exempt employees.