U.S. Department of Labor Issues Final Overtime Rule

Posted on Sep 30, 2019

On September 24 2019, the United States Department of Labor (DOL) issued its Final Rule increasing the threshold amounts for exempt status under the Fair Labor Standards Act (FLSA).

The FLSA empowers the DOL to define and delimit the requirements for certain employees to be exempt from overtime.  The DOL has expressed what is required for an employee to be exempt from overtime in terms of the duties performed and the salary paid.  The Final Rule raises the minimum salary for “white collar” employees to be exempt from overtime from $455 per week to $684 per week. Employees earning a salary less than $684 per week must be paid overtime for hours worked in excess of 40 each week.  The Final Rule does not affect the duties tests, which remain part of the exemption analysis. Accordingly, employees earning more than $684 per week may only be exempt from overtime if they perform job duties consistent with those considered by the DOL to be exempt from overtime.

The duties tests are somewhat relaxed for those employees who are considered to be “highly compensated.”  Prior to the issuance of the Final Rule, the DOL considered a person to be highly compensated if s/he was paid a salary of at least $455 per week and the employee’s total annual compensation was at least $100,000.  Now, additional payments besides salary, such as bonuses, commissions, and incentive payments, must be considered in order to determine whether an employee is highly compensated.

The Final Rule increased the minimum annual compensation to be considered a highly compensated employee from $100,000 to $107,432 per year. Thus, employees who are paid a minimum salary of at least $684 per week and receive total annual compensation of at least $107,432 may be exempt from overtime if they meet the relaxed duties test for this exemption.  Employers may include nondiscretionary bonuses and incentive payments to satisfy up to 10 percent of the total compensation the employee receives.

The changes will take effect Jan. 1, 2020.  In anticipation of the 2020 effective date, each employer should begin reviewing its existing workforce to determine if there are any positions which need to be reclassified as non-exempt.  If you have questions concerning the classification of your employees, please contact Keith Sieczkowski, Labor & Employment Lawyer with Branscomb Law, at ksieczkowski@branscomblaw.com or (361) 886-3800, or Sandra White, Labor & Employment Lawyer with Branscomb Law, at swhite@branscomblaw.com or (210) 598-5400.