New Overtime Rule Takes Effect January 1, 2020

On September 24, 2019, the United States Department of Labor (“DOL”) issued a new overtime rule. The rule increases the minimum salary threshold to be exempt from the overtime mandates of the Fair Labor Standards Act (“FLSA”) to $35,568 ($684 per week), from the current $23,660 ($455 per week). The rule will take effect on January 1, 2020.

The final minimum salary threshold is slightly higher than the $35,308 ($679 per week) per week in the proposed rule. However, like the proposed rule, the final rule allows employers to include nondiscretionary bonuses and incentive payments, including commissions paid at least annually, to satisfy up to 10% of the minimum salary requirement. This means that up to $3,530.80 in bonuses or incentive payments can be counted toward the minimum salary, so that an employee’s regular salary could be as low as $31,777.20.

The rule also increases the total annual compensation required to meet the highly compensated employee test from $100,000 to $107,432. This is much less than the $147,414 threshold in the proposed rule.

The final rule makes no changes to the existing “duties test” to determine which employees’ work responsibilities are sufficient to be eligible for the overtime exemption. The DOL estimates the new rule will make 1.3 million more workers eligible for overtime pay.

The January 1, 2020 effective deadline gives employers very little time to prepare for the changes. Employers should take action now to review and analyze employee classifications and make appropriate adjustments to compensation and duties. Employers should also prepare to communicate with employees about the new rule and changes to compensation or duties.

Companies who would like more information about the new overtime rule or who would like assistance with proper classification of employees, should consult Jennifer A. Ermilio at jae@stevenslee.com, Joseph P. Hofmann at jph@stevenslee.com, or the Stevens & Lee attorney with whom you regularly work.

This News Alert has been prepared for informational purposes only and should not be construed as, and does not constitute, legal advice on any specific matter. For more information, please see the disclaimer

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