Overtime Rules - Effective January 1, 2020

As a company, one of the biggest areas of potential liability is in the areas involving employees. Hiring, firing, compensating, scheduling hours, relationships, and on and on. One of the first things any company will consider is what to pay certain employees. Many get into trouble by incorrectly classifying employees as “exempt” in order to avoid the need to pay overtime wages. This is a short-sighted mistake that can carry long-term substantial penalties. As part of recent proposals to update these rules, the Dept of Labor finalized a rule in September 2019 to address overtime questions.

The final rule updates the earnings thresholds necessary to exempt executive, administrative and professional employees from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements, and allows employers to count a portion of certain bonuses/commissions towards meeting the salary level. The new thresholds account for growth in employee earnings since the thresholds were last updated in 2004.

In the final rule, the Department is:

• raising the “standard salary level” from the currently enforced level of $455 per week to $684 per week (equivalent to $35,568 per year for a full-year worker);

• raising the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year;

• allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices; and

• revising the special salary levels for workers in U.S. territories and the motion picture industry.