Changes to Overtime Rules
New Rules Are Effective January 1, 2020
The US Department of Labor (DOL) has issued the final overtime rules that go into effect on January 1, 2020. The final rules update the earning thresholds used to determine if executive, administrative or professional employees are exempt from the FLSA’s minimum wage and overtime pay requirements. The current thresholds have not been updated since 2004. The DOL states that the new rules take into consideration the growth in employee earnings, and they intend to propose updates on a regular basis moving forward.
How These Changes Affect You
- The salary minimum for an employee to be exempt from overtime increased from $455 to $684 weekly which is equivalent to $35,568 annually. The duties test for determining if an employee has met the executive, administrative or professional exemption has not changed. Note that all of the tests, including the new salary minimum, must be met. If you have an exempt salaried employee who is not making at least $684 per week then they become nonexempt and must receive overtime pay.
- The highly compensated employee threshold, which applies to non-executive, administrative or professional employees (“white-collar” employees) who were previously exempt from the FLSA overtime requirements at $100,000 of compensation are no longer. The new compensation threshold is $107,432. Note that the duties test has not changed for this worker classification either.
- Employers are allowed to use nondiscretionary payments (bonus, incentives, commissions) that are paid at least annually for calculating thresholds; however, it is limited to 10% of the standard salary level.
- Special salary levels for workers in US territories and the motion picture industry have also been updated. The revised special salary rate for workers in US territories is $380 per week in American Samoa and $455 per week in Puerto Rico, the US Virgin Islands, Guam and the Commonwealth of the Northern Mariana Islands. The special salary for employees in the motion picture industry is now $1,043 per week.
The DOL estimates this will change the exemption status for 1.3 million US workers, making them eligible for overtime pay. It’s important to begin reviewing your exempt employees now to verify they will remain exempt under the new rules as the deadline to comply is just around the corner.
