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Department of Labor rules on Overtime Pay Exemption Threshold

On September 24, 2019, the U.S. Department of Labor (DOL) announced its final rule updating the overtime pay exemption threshold. Effective January 1, 2020, the threshold will increase from $23,600 to $35,568. Employees who make less than $35,568 will be entitled to overtime pay at a rate of 1.5 times their regular rate of pay for all hours worked beyond 40 during a regular work week. Employees who receive a salary of $35,568 or more and satisfy certain duties tests are exempt from the overtime pay requirement under federal law. This new rule does not make any change to any of the duties tests for these exemptions

The final rule updates the earnings thresholds necessary to exempt executive, administrative and professional employees from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements, and allows employers to count a portion of certain bonuses/commissions toward meeting the salary level. The new thresholds account for growth in employee earnings since the thresholds were last updated in 2004.

In the final rule, the Department:

  • raises the “standard salary level” from the currently enforced level of $455 per week to $684 per week (equivalent to $35,568 per year for a full-year worker);
  • raises the total annual compensation requirement for “highly compensated employees” from the current level of $100,000 per year to $107,432 per year;
  • allows employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices; and
  • revises the special salary levels for workers in U.S. territories and the motion picture industry

Additional detail can be found on the DOL website.

October 02, 2019