On Sept. 24, 2019, the U.S. Department of Labor (DOL) announced a new final rule that updates the salary thresholds that some individuals must meet in order to qualify for a minimum wage and overtime exemption under the federal Fair Labor Standards Act (FLSA). The final rule becomes effective on Jan. 1, 2020.
The 2019 Overtime Final Rule
As expected, this final rule includes updates to the standard salary level for the EAP and HCE exemptions and allows employers to count up to 10 percent of an employee’s nondiscretionary bonuses and incentive payments (including commissions) as part of the employee’s standard salary level.
The rule also creates special standard salary levels for the exemption that applies to employees in the motion picture production industry and some U.S. territories.
The table below shows the salary levels for the EAP and HCE exemptions that will apply on Jan. 1, 2020. The final rule’s salary levels are different from the 2016 rule and the 2019 proposed rule.
Employer Action
The final rule’s Jan. 1, 2020 effective date leaves little time for employers to prepare for the changes. Employers should:
- Determine which currently exempt employees have salaries below the new threshold; and
- Decide whether to increase salaries for these individuals or reclassify them as non-exempt employees.
Additional Update
The DOL intends to update the standard salary and HCEs total annual compensation levels more regularly in the future through notice-and-comment rulemaking.
Don’t Forget State Requirements
Keep in mind that states may have their own requirements as well. In New York the minimums are already higher than this new threshold.
This Compliance Bulletin is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. © 2019 Zywave, Inc. All rights reserved.
