The New Overtime Rule is Here!

Today, the U.S. Department of Labor announced the new Final Overtime Rule that raises the salaried exemption threshold. As you may recall, the Obama administration tried to raise the salary threshold for the overtime exemption for executive, administrative, and professional employees from $23,660/year ($455/week) to $47,892/year ($921/week). Employers were not pleased with an increase that large, and they fought it in the courts. The Obama overtime rule was eventually enjoined, then invalidated, and now the new administration has made the decision to increase the salary threshold, albeit by a smaller amount. Specifically, in the final rule announced today, the DOL is:

•    raising the "standard salary level" from the currently enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker);

•    raising the total annual compensation level for "highly compensated employees (HCE)" from the currently-enforced level of $100,000 to $107,432 per year;

•    allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level, in recognition of evolving pay practices; and

•    revising the special salary levels for workers in U.S. territories and in the motion picture industry.

The DOL projects that this new rule will make 1.3 million more American workers eligible for overtime pay under the Fair Labor Standards Act (FLSA).

The final rule will be effective on January 1, 2020. Between now and then, employers need to review their workforce and determine if any employees will no longer meet the salaried exemption and thus, will be entitled to earn overtime. In fact, now is a good time for employers to review all exempt employees to ensure that they are being treated appropriately under the FLSA.