Breaking: US DOL Final OT Rule Raises the FLSA Exemption Thresholds, Effective Jan. 1, 2020

On Tuesday, Sept. 24, the U.S. Department of Labor (DOL) released the long-anticipated final rule for overtime exemptions, which alters the salary thresholds for several of the Fair Labor Standards Act (FLSA) exemptions. Under the final rule, the salary threshold levels for the white-collar exemptions and the highly compensated employee exemption were increased, making it more difficult for an employee to be classified as exempt under the FLSA. As a result, an estimated additional 1.3 million workers will qualify for overtime premiums.

The most important changes in the new rule include:

• Raising the salary requirement for white-collar exemptions (executive, administrative, and professional exemptions) from $455 per week (equivalent to $23,600 per year) to $684 per week (equivalent to $35,568 per year);
• Raising the total annual compensation requirement for highly compensated employees from $100,000 per year to $107,432 per year;
• Permitting employers to use nondiscretionary bonuses and incentive payments (including commissions) paid on at least an annual basis to satisfy up to 10 percent of the salary requirement; and
• Altering the special salary levels for workers in Puerto Rico, U.S. Virgin Islands, Guam, the Northern Mariana Island, and American Samoa.

The final rule will go into effect on Jan. 1, 2020. It replaces the 2016 Obama-era rule that was enjoined by a federal judge in Texas before it took effect. While the final rule raises the salary thresholds, the thresholds are significantly lower than the 2016 rule. The DOL also abandoned its plans to automatically update the minimum salary requirements over time.

For more information regarding compliance with this decision, please contact your Dinsmore labor attorney. More information on the proposed rule is available here.