On September 24, 2019, the U.S. Department of Labor (DOL) announced a final rule to make 1.3 million American workers eligible for overtime pay under the Fair Labor Standards Act (FLSA). This is the first change in the overtime regulations in 15 years.
The final rule updates the earnings thresholds necessary to exempt executive, administrative, or professional employees from the FLSA’s minimum wage and overtime pay requirements and allows employers to count a portion of certain bonuses (and commissions) towards meeting the salary level. The new thresholds account for growth in employee earnings since the former thresholds were set in 2004. In the final rule, DOL is:
- Raising 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);
- Raising the total annual compensation level for “highly compensated employees (HCE)” from the currently enforced level of $100,000 to $107,432 per year;
- Allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level, in recognition of evolving pay practices; and
- Revising the special salary levels for workers in U.S. territories and in the motion picture industry.
This final rule will be effective on January 1, 2020.
These increases to the salary thresholds are long overdue in light of salary and wage growth since 2004. DOL estimates that 1.2 million additional workers will be entitled to minimum wage and overtime pay as a result of the increase to the standard salary level. The Department also estimates that an additional 101,800 workers will be entitled to overtime pay as of result of the increase to the HCE compensation level.