FLSA Overtime Rule Changes

The FLSA overtime rule determines whether employees are eligible or exempt for overtime pay. Exempt employees, because of their rate of pay and type of work that they do, are not eligible for overtime pay for hours worked over 40 in a workweek. Nonexempt employees must be paid time and a half for any hours worked more than 40 in a workweek.

The Department of Labor issued a final rule on Sep. 24, 2019 increasing the salary-level threshold for white-collar exemptions to $684 a week from $455 a week. The final rule is effective Jan. 1, 2020 and is estimated to extend overtime protections to more than one million workers who are not currently eligible under federal law.

Unless exempt, employees covered by the Fair Labor Standards Act must receive at least time and one-half their regular pay rate for all hours worked over 40 in a workweek.

Meeting the salary threshold doesn’t automatically make an employee exempt from overtime pay; the employee’s job duties also must primarily involve executive, administrative or professional duties as defined by the regulations.
Under the Sep. 2019 final rule:

  • Workers who do not earn at least $35,568 a year ($684 a week) would have to be paid overtime, even if they’re classified as a manager or professional.
  • Nondiscretionary bonuses and incentive payments (including commissions) paid on an annual or more frequent basis may be used to satisfy up to 10 percent of the standard salary level.
  • The special rule for highly compensated employees would require workers to earn a total annual compensation of at least $107,432 ($684 of which must be paid weekly on a salary or fee basis).
  • Special salary levels would apply to certain U.S. territories and an updated base rate would apply to employees in the motion-picture industry.
  • No changes to the duties tests.
  • The final rule is effective Jan. 1, 2020.
  • The Department of Labor intends to propose updates to the salary threshold regularly to ensure that these levels continue to provide useful tests for exemption. Updates would not be automatic and would continue to require notice-and-comment rulemaking.

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