A decision years in the making has finally happened. The U.S. Department of Labor (DOL) recently announced a final rule to make 1.3 million American workers eligible for overtime pay under the Fair Labor Standards Act (FLSA). It sets the minimum salary threshold for the FLSA’s white-collar exemptions at $684 per week, or $35,568 per year.
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. Here’s what employers need to know:
- Employers will be able to credit non-discretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level.
- The highly compensated employee (HCE) exemption compensation requirement will be set at $107,432 per year.
- No changes will be made to the duties tests.
- No updates will be made automatically.
The final rule will be effective on January 1, 2020. The new thresholds account for growth in employee earnings since the current overtime provisions were set in 2004.
How Employers Can Prepare for the Proposed Overtime Rule
The 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 a result of the increase to the HCE compensation level.
More information about the final rule is available here.
In an upcoming blog, we will look at some scenarios to consider. Keep in mind, employment law changes are one of the most difficult areas of HR to navigate, especially as those changes relate to wage and hour guidelines. Additionally, some states and localities have extra rules to consider. When you partner with FrankCrum, you gain access to a team of HR consultants, known as FrankAdvice.
To learn more about FrankAdvice and the other PEO services offered at FrankCrum, call 800-277-1620.
