On September 24th, 2019 the U.S. Department of Labor (“DOL”) announced its final overtime rule setting the minimum salary threshold for overtime eligibility at $35,568 ($684 per week) for white-collar exemptions. This is an increase from the current threshold of $23,660 ($455 per week) and slightly higher than the $35,308 proposed in March of 2019. The updated threshold is estimated to provide overtime eligibility to more than a million additional U.S. workers.
Other proposed changes from the announcement include:
- The new salary level requirement can be met by using annual or more frequent nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the salary level test.
- The exemption threshold for Highly Compensated Employees (HCE) will be set at $107,432, which is lower than the initial proposal of $147,414 but up from the current level of $100,000. HCE remain eligible for an exempt status if they are paid over the new amount and meet a reduced duties test. The reduced duties test includes:
- The employee’s primary duty must be office or non-manual work, and
- The employee must regularly perform at least one of the bona fide exempt duties of an executive, administrative or professional employee.
- No changes to the duties requirements, which are evaluated in determining the exemption status of an employee. This means a job reclassification, if any, will be based only on changes to the threshold amount.
- The DOL has not set a time frame for automatic increases, as proposed in 2016, but commits to conducting periodic reviews to keep the thresholds in line with future wage rates and inflation.
Employers have 3 months to comply with the changes as the ruling takes effect on January 1, 2020. As a reminder, the Fair Labor Standards Act does not preempt stricter state standards.
Published September 26, 2019
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