Employers: New Overtime Rules for New Year

Employers, the long wait is over. You finally have an answer regarding whether the federal overtime regulations are going to be changed. In March 2019, the U.S. Department of Labor (DOL) abandoned its 2016 attempt to increase the salary threshold for ex-empt employees when it issued a much anticipated proposed rule. In September 2019, the DOL formally rescinded the 2016 rule and issued its new final overtime rule, which takes effect January 1, 2020. 

As New Year’s Day will be here before we know it, this is a good time for employers to audit their pay practices to make sure that employees are and will continue to be properly classified, update timekeeping and payroll systems, and train reclassified employees on new processes before the new rule takes effect.

The new final overtime rule in creases the earnings thresholds necessary to exempt executive, administrative, professional, and highly compensated employees from the Fair Labor Standard Act’s overtime pay requirements from the levels that had been set in 2004.  Specifically, the new final rule:

• Increases the “standard salary level” from $455 to $684 per week (equivalent to $35,568 per year for a full-year worker);
• Raises the total annual compesation level for “highly compensated employees” from $100,000 to$107,432 per year; and
• Revises the special salary levels for workers in U.S. territories and in the motion picture industry.

And, for the first time, the final rule allows 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 for executive, administrative, and professional employees (not highly compensated employees).

Employers take note, however, that the new final overtime rule does not change the duties portions of the otherwise affected exemptions. More information about the new inal overtime rule is available on the DOL website https://www.dol.gov/whd/overtime2019/overtime_FS.htm

Gail E. Farb is an attorney with Williams Parker. She focuses on labor and employment law, advising management clients regarding preventive measures in a wide variety of employment-related matters. She is a graduate of Emory University School of Law and Duke University. She may be reached at [email protected].