After years of debate, the Department of Labor (DOL) issued a final rule on September 24 that increased the salary threshold for an “exempt” employee under the Fair Labor Standards Act (FLSA) to $684 a week ($35,568 annually) from $455 a week effective January 1, 2020.
As a reminder, unless exempt, employees covered by the FLSA must receive at least time and one-half their regular pay rate for all hours worked over 40 in a workweek.
The new, higher salary threshold means that more employees will be considered nonexempt and, therefore, eligible for overtime pay. In fact, this rule is expected to extend overtime protections to more than one million workers who are not currently eligible under federal law.
After following this topic for some time now, I believe that it seems to be a reasonable increase after the DOL has fought the necessary battles to make it happen. After all, the salary threshold had not been updated since 2004. The DOL attempted to introduce an update in 2016 when it proposed that the threshold for exempt employees be raised from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). The 2016 rules, however, never went into effect due to opposition from state courts.
It’s important to note that the new salary threshold rules for 2020 will apply to executive, administrative, and professional positions.
For further reading, I recommend:
- “New Overtime Rules Go Into Effect January 1, 2020,” The National Law Review, October 7, 2019.
- FLSA Overtime Rule Resources, Everything HR professionals need to know about the FLSA salary threshold, SHRM
The Society for Human Resource Management offers the following tips for employers:
- HR professionals must be prepared to determine overtime eligibility for each employee.
- Employers will need to take a close look at who on their staff is now exempt or nonexempt under the new 2020 rules. It may be time to make the necessary adjustments to employees’ salaries.
- To help employers meet the new threshold (thereby keeping overtime to a minimum), the DOL will allow them to use nondiscretionary bonuses and incentive payments, such as commissions, to satisfy up to 10% of the salary threshold for qualifying positions. Catch-up payments may also be allowed.
- Meeting the salary threshold doesn’t automatically make an employee exempt from overtime pay; remember: the employee’s job duties also must primarily involve executive, administrative or professional duties as defined by the regulations.
If you would like further guidance and advice about the new FLSA rules, please give me a call. I’m happy to speak with you about your company’s compensation practices and how you can best prepare for this change.