overtime rule

This week the US Department of Labor (DOL) released the new Fair Labor Standards Act (FLSA) rule for the white-collar overtime exemption.  The new rule goes into effect January 1, 2020 and raises the salary threshold for the white-collar exemption from $455 per week to $684 per week.

FLSA Exempt Rule

To be exempt from overtime employees classified as executive, administrative, professional or highly compensated under the FLSA, must be 1) paid a salary that meets the threshold and 2) meet the duties test.  The threshold changes are limited to these white-collar exemptions.  No change has been made to the various other exemptions (for example, outside sales) that do not specifically include a salary requirement even if the employee happens to earn a salary.

Besides $684 per week salary threshold, the new rule raises the so-called highly compensated worker threshold from $100,000 to $107,432. The highly compensated employee exemption covers well-paid workers who perform some managerial duties. Employees designated as highly compensated face less stringent requirements for being exempt from overtime pay.

New Provision

In addition to the salary threshold change, employers will be allowed to use non-discretionary bonuses and incentive payments (that are paid at least annually) to satisfy up to 10% of the standard salary level.

Employers Should Prepare

To prepare, employers should review salaries of all affected exempt positions to determine if any adjustments will be necessary to stay in compliance. Employers can either increase employee’s pay to meet the salary test or re-classify the employee as non-exempt. Newly re-classified employees will be eligible to receive overtime pay if they work more than 40 hours in a work week.

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