On September 24, 2019, the U.S. Department of Labor announced a widely anticipated rule that entitles approximately 1.3 million additional U.S. workers to overtime pay.

The final rule increases earning thresholds necessary to exempt executive, administrative, and professional employees from the Fair Labor Standard Act’s minimum wage and overtime pay requirements. The final rule also allows employers to count a portion of some bonuses and commissions toward reaching the increased thresholds.

In particular, the final rule:

• Raises the salary level that must be met to qualify for an exemption from $455 per week to $684 per week ($35,568 annually);
• Increases the “Highly Compensated Employees” earning requirement that must be satisfied to trigger an exemption from $100,000 to $107,432; and
• Permits employers to use nondiscretionary bonuses and incentive compensation paid at least annually to satisfy up to 10% of the new exemption salary levels.

Of course, even workers who earn above the new thresholds still may be eligible for overtime pay unless they perform certain defined duties. The new rule only revises compensation levels and does not change the criteria that must be met to satisfy the duties tests.

The updated rule is expected to take effect on January 1, 2020. Employers should consult with counsel prior to the effective date to address the impact of the rule and make any necessary classification and/or compensation adjustments to manage new overtime obligations.

If you have questions about this new rule, please contact John Balitis, Daniel Peabody, or any other attorney in our Labor and Employment practice.

ABOUT THE AUTHORS

John J. Balitis | Read Bio

Daniel Peabody | Read Bio

For over 75 years, Jennings Strouss has been dedicated to providing clients with strategic legal guidance to help them seize every opportunity. The firm is well-known for its rich heritage, commitment to community, and long-lasting relationships. We have a deep understanding of business and law. When you work with us, you’ll have a team of legal experts who are dedicated to your vision of success.

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