The Department of Labor has issued a long-anticipated final rule to the overtime regulations within the Fair Labor Standards Act (FLSA). Effective January 1, 2020, the salary level required to be exempt from overtime (along with meeting certain duties test requirements) will be $35,568 or $684 per week.
The final rule marks the first change to the overtime exemption salary threshold since 2004. The current minimum salary for an employee classified as exempt from overtime is $455 per week. The change in regulations means that employers must either raise the employee’s salary or reclassify any employee earning at least $455 but less than $684 to meet the new minimum requirement. If reclassifying, an employee would be moved to non-exempt status and compensated at time and one-half for any hours worked over 40 in a given work week.
The key provisions in the DOL’s new overtime rule include:
- Raising the ‘standard salary level’ from $455 to $684 per week.
- Raising the total annual compensation level for ‘highly compensated employees’ from $100,000 to $107,432 per year.
- Allowing employers to use non-discretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level.
- Revising the special salary levels for workers in U.S. territories and in the motion picture industry.
The DOL Estimates
The DOL estimates that as a result of the final rule, 1.3 million currently exempt employees will be reclassified or become nonexempt. Furthermore, the Department remains committed to reviewing and potentially increasing the threshold more frequently in the future. Such changes would be subject to notice-and-comment rule making.
We are here to help
In the coming weeks a BCN Services Human Resources representative will reach out to Clients that need to take action in order to review the wage and business structure as it relates to this new rule. We look forward to assisting you in successfully managing any redesign plan and implementation. If you have immediate questions, please contact us at 1-800-891-9911.