The U.S. Department of Labor announced a final rule on Tuesday, Sept. 24 that makes 1.3 million American workers newly eligible for overtime pay.
It updates the earnings thresholds necessary to exempt executive, administrative and professional employees from the Fair Labor Standards Act’s minimum wage and overtime pay requirements and allows employers to count a portion of certain bonuses/commissions toward meeting the salary level. The new thresholds account for growth in employee earnings since the thresholds were last updated in 2004.
The Society for Human Resource Management notes that key provisions of the final rule include:
Salary Threshold – Raises the threshold to $35,568 per year (or $684 per week) by reverting to the methodology used in the 2004 rule that focused on the 20th percentile of full-time wage earners in the lowest income region of the company (identified as the South) as well as the retail industry.
Highly Compensated Employees – Sets the new threshold at $107,432, which is reduced from the proposed level of over $147,000.
Salary Test – Allow nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary test requirement, with a single pay period to make any “catch up” payments.
Future Salary Updates – Does not implement automatic updates.
Duties Test – Makes no changes to the duties tests.
“For the first time in over 15 years, America’s workers will have an update to overtime regulations that will put overtime pay into the pockets of more than a million working Americans,” Acting U.S. Secretary of Labor Patrick Pizzella said. “This rule brings a commonsense approach that offers consistency and certainty for employers as well as clarity and prosperity for American workers.”
The full 245-page final rule can be read at https://www.dol.gov/whd/overtime2019/overtime_FR.pdf.
It is expected to be in the Federal Register on Friday, Sept. 27 and has an effective date of Jan. 1, 2020.