On September 24, 2019, the Department of Labor (DOL) released a final rule making changes to the Fair Labor Standards Act (FLSA) overtime regulations. Set to take effect on January 1, 2020, the final rule updates the earnings thresholds required to exempt executive, administrative and professional employees from the FLSA’s minimum wage and overtime pay requirements. Employers may count a portion of certain bonuses/commissions toward meeting the salary level.
New Earning Thresholds Under Final Rule
Salary Threshold for Executive, Administrative, and Professional Workers
- The salary threshold to meet the executive, administrative, or professional exemption will be $35,568 per year or $684 per week, up from the current $23,660 annual/$455 weekly requirement.
Salary Threshold for Highly Compensated Workers
- The salary threshold to meet the highly compensated worker exemption will be $107,432 per year, up from the current $100,000 annual requirement.
Bonuses and Commissions
- Employers may use nondiscretionary bonuses and incentive payments, including commissions, that are paid at least annually, to satisfy up to 10 percent of the salary threshold.
No Mandatory Increase is Required
- Previous proposed rules included language that would require salary thresholds to be increased every several years. The DOL chose not to include the requirement because it would not allow the department flexibility to adapt to unexpected circumstances.
What the Final Rule Means for Employers
According to the DOL, approximately 1.3 million more workers will be eligible for overtime. There is no exemption from these requirements for small businesses. The FLSA sets a floor on wages and a premium for work beyond 40 hours per week to create a level playing field for businesses operating in the United States. Because individual cities and states, such as California, may have stronger wage and hour protections than those established under the FLSA, the higher standard applies in that city or state. As an employer, you should consider auditing your wage practices to ensure all non-exempt employees are properly being paid overtime to avoid high penalties for FLSA noncompliance.