On September 24, 2019, the Department of Labor (DOL) announced its much anticipated final rule updating the salary levels used to determine whether an employee is exempt from overtime requirements under the Fair Labor Standards Act, which is scheduled to take effect on January 1, 2020. When the rule goes into effect, it will be the first update to the salary levels since 2004.

In the final rule, to be exempt from overtime eligibility under the executive, administrative, and professional exemptions, an employee now must earn $684 per week (or $35,568 per year) as well as satisfy the job duties tests for each exemption. This amount is a slight increase from the threshold contained in the rule when it was proposed in March 2019 ($679 per week or $35,308 per year) to account for updated data during the rule making process. The final rule, however, is significantly less than the $47,476 threshold proposed in 2016.

In addition, the rule increases the total annual compensation level of highly compensated employees (HCE) from $100,000 to $107,432. During the rule making process, the DOL reduced the HCE threshold to the 80th percentile of weekly earnings from the 90th percentile ($147,414) contained in the proposed rule.

The final rule also permits up to ten percent of the salary amount to be satisfied by the payment of commissions, incentives and non-discretionary bonuses that are paid annually or more often.

The DOL estimates that these changes will result in 1.3 million currently exempt overtime workers becoming eligible for overtime resulting in an estimated $298.8 million in extra annual pay.

The DOL’s webpage on the new rule is found here.

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