On September 24, 2019, the Department of Labor (DOL) announced a final rule increasing the salary threshold for the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements. The final rule raises the “standard salary level” from $455 per week to $684 per week (equivalent to $35,568 per year). Further, the total annual compensation level for highly compensated employees is raised from $100,000 to $107,432 per year. The increase accounts for growth in employee earnings since the thresholds were last updated in 2004. The final rule also allows the use of nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level. The DOL estimates that approximately 1.3 million more workers will become eligible for overtime as a result of the salary threshold increase.
Of note, the rule change does not affect application of the duties test under the law. To be considered exempt from the overtime provision of the rule, an employee must be salaried, earn more than $35,568 per year, and meet the duties criteria for executive, administrative, or professional employees (white collar exemptions) as set forth in the rule.
This final rule has been submitted to the Office of the Federal Register for publication. The final rule becomes effective on January 1, 2020. The entire text of the 245 page final rule can be found here, and the Factsheet with Frequently Asked Questions can be found here. It remains unclear whether the new rule will be the subject of litigation. Bugbee & Conkle will post updates with any developments in this area as they arise.