Department of Labor Releases Long-Awaited Final Rule on Overtime Pay

A new overtime rule paves the way for overtime eligibility among executive, administrative, and professional employees.

 

Department of Labor Releases Long-Awaited Final Rule on Overtime Pay

 

The Department of Labor (DOL) sets the thresholds that limit exemptions for executive, administrative, and professional employees. The law on overtime, which defines whether a worker is eligible for overtime pay or not, depends on their pay rate and the type of work they do. Until recently, workers who made over $455 a week in the same pay period and worked over 40 hours were exempt from the rules on overtime pay. The DOL released an amendment to the provisions of the Fair Labor and Standards Act (FLSA) on September 24th. The changes will go into effect on January 1, 2020, affecting around 1.3 million workers.

 

As a business owner, here’s what you need to know.

 

  • The standard salary level is increasing from $455 to $684 per week. This is equivalent to $35,568 per year for a full-year worker.
  • The total annual compensation level for highly compensated employees (HCEs) is increasing from $100,000 to $107,432 per year
  • Workers receiving at least annual non-discretionary bonuses and incentive compensation may use up to 10% of these funds to reach their standard wage rate.
  • Special salary levels for companies operating in the U.S. territories or in the motion picture industry will be updated.

 

Workers who meet the salary level thresholds set out in the new rule will not be automatically exempted from the minimum wage and overtime pay requirements of the FLSA. An employee’s job duties must also primarily involve executive, administrative, or professional duties as defined by FLSA regulations. In comparison, the new rule requires employees who do not meet the minimum requirement of $684 a week (or $35,568 a year) to claim overtime pay.

 

The tests used to determine eligibility based on work duties have not changed. As previously mentioned, the final rule will go into effect on January 1, 2020. If you have questions about an employee’s exempt/non-exempt status or how this final rule will impact your business, please give the professionals in our office a call.

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