A new rule from the U.S. Department of Labor will make many more workers eligible for overtime pay under the Fair Labor Standards Act (FLSA). The FLSA sets minimum wage and overtime pay requirements for non-exempt U.S. workers.
Unless an employee meets the requirements for an exemption from the FLSA, an employee must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half of their regular rate of pay. To be exempt from the FLSA overtime rules, an employee must be (a) paid at least a certain amount per year; (b) be paid on a salary basis; and (c) perform exempt job duties.
Prior to the new rule, employees had to be paid at least $23,600 per year ($455 per week) to meet the salary exemption. The new rule, effective January 1, 2020, raises the standard salary threshold to $35,568 per year for a full-year worker ($684 per week). It also raises the total annual compensation level for highly compensated employees to $107,432 per year and allows employers to use non-discretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10% of the standard salary level.
The Department of Labor estimates that the increased salary level will entitle an additional 1.2 million workers to minimum wage and overtime. It also estimates that an additional 101,800 employees will be entitled to overtime pay as a result of the increase to the HCE level.
Employers should review employee’s salary rates in light of the increase to the overtime requirements. Employees making less than $684 per week ($35,568 per year) should be paid on an hourly basis and be entitled to time and a half for hours worked over 40 in a workweek.
