The United States Department of Labor recently issued its final overtime rule, which is anticipated to make 1.3 million workers eligible for overtime under the Fair Labor Standards Act (FLSA).
Under the FLSA, employees are generally entitled to receive overtime pay unless they satisfy an exemption. The overtime exemptions typically require that an employee receive a minimum weekly salary, and perform certain duties. The final rule increases the minimum salary threshold for overtime exemptions under the FLSA from $455 to $684 per week ($35,568 per year). This increase becomes effective on January 1, 2020, and is the first increase of the FLSA minimum salary threshold since 2004.
The final rule permits employers to pay up to 10% of the minimum salary threshold by way of commissions, bonuses, and non-discretionary incentives. If, however, employers utilize this 10% option, they are only permitted a single pay period to make-up any shortfall and if an employer falls short of the minimum threshold by even $1, the employee is entitled to overtime for the entire prior year.
The final rule also increases the minimum salary threshold under the “highly compensated employee” overtime exemption from $100,000 to $107,432 per year.
In addition to satisfying the minimum salary thresholds, employees must also continue to meet the duties portions of the overtime exemptions. Moreover, businesses in states with higher minimum salary requirements, such as New York, must comply with the higher state threshold.
The upcoming rule change creates an opportune time for employers to review their compensation practices to ensure that employees are properly categorized as exempt or non-exempt from overtime. If you have questions about the overtime exemptions or your business’s pay practices, please contact us at (201) 345-5412 or through our online scheduling calendar to set up a complimentary consultation.