The U.S. Department of Labor (DOL) has announced its long-awaited Final Overtime Rule to update the federal overtime regulations governing which employees are entitled to minimum wage and overtime pay under the federal wage and hour law by increasing the salary level required under the executive, administrative and professional (EAP) white collar exemptions. The Final Overtime Rule is effective as of January 1, 2020.
In less than 100 days, the Final Overtime Rule, will increase the standard salary level by almost 50 percent to $684 per week (equivalent to $35,568 per year) from the current $455/week ($23,660 annually) originally set in 2004. Above this salary level, eligibility for overtime varies based on job duties.
The Final Overtime Rule, which differs from the 2016 Final Rule and the proposed rule released in March of this year will:
- raise 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);
- raise the total annual compensation level for exemption from minimum wage and overtime requirements for “highly compensated employees (HCE)” from the currently-enforced level of $100,000 to $107,432 per year;
- allow employers to use non-discretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10% of the standard salary level, in a 52-week period; and
- revise the special salary levels for workers in U.S. territories and in the motion picture industry.
The Final Overtime Rule does not include changes to the job duties tests nor is there a provision for automatic adjustments to the salary threshold included. The DOL did however reaffirm its intent to update the earnings thresholds more regularly in the future through notice-and-comment rulemaking.
For more information about the Final Overtime Rule
- go to http://www.dol.gov/whd/overtime2019 for resources the DOL has made available to employers including a Fact Sheet, and Frequently Asked Questions.
What Can You Do Now?
If you haven’t already done so, you may wish to take time to identify impacted salaried, exempt employees who are currently paid a salary of less than $684 per week. To help ensure your compliance with the Final Overtime Rule, confirm these individuals meet the applicable duties test and adjust their weekly salary and/or bonus appropriately. Alternatively, such employees may be transitioned to non-exempt status and eligible for overtime pay. Also, consider the need to update your timekeeping and recordkeeping policies as well as consider training for non-exempt employees who must track all hours worked, including overtime hours.
Consider contacting your CPA or legal counsel to discuss the potential impact of the Final Overtime Rule to your company, and what next steps may be best for your specific situation as you look to ensure compliance with the Final Overtime Rule by the effective date of January 1, 2020.
Did You Know?
The Washington State Department of Labor & Industries is in the process of updating the overtime exemption limits for our state, looking to set the state threshold well above the Federal limit of $35,568 to almost $80,000 per year. Learn more here.