On September 24, 2019, the U.S. Department of Labor announced a final rule to make 1.3 million American workers newly eligible for overtime pay. The new rule will take effect on January 1, 2020.
The final rule 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, and 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.
In the final rule, the Department is:
- 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.
While the FLSA applies to the majority of employees in the United States, it does allow employers to claim exemptions from its requirements for certain employees whose jobs meet specific criteria. The FLSA provides an exemption from both minimum wage and overtime requirements for employees employed as bona fide executive, administrative, professional, and outside sales employees.
To qualify for one of these exemptions, employees generally must meet certain tests regarding their job duties and be paid a certain minimum salary. Job titles alone do not determine exempt status, and neither does the receipt of a particular salary. In order for an exemption to apply, an employee’s specific job duties and earnings must meet all of the applicable requirements. It is important to note that simply paying an employee a salary does not relieve an employer of minimum wage and overtime obligations to that employee. Unless they meet the criteria of a specific exemption, employees covered by FLSA protections who are paid a salary are still due overtime if they work more than 40 hours in a week.
Employers should begin to prepare for compliance with the new rule and consider the impact that it will make on their businesses. PS&E anticipates providing further detail and analysis of the new rule in an upcoming issue of the FOCUS.
Should you have a question regarding compliance with these new standards for salaried employees or any other questions about wage and hour law, the attorneys at PS&E are here to assist you. Please contact us at (937)223-1130 or email Matt Stokely (email@example.com) or Kristina Curry (firstname.lastname@example.org) for further information.