Changes to Federal Overtime Rule Effective 1/1/2020

The U.S. Department of Labor recently announced a final rule under the Fair Labor Standards Act (FLSA) to make over 1 million American workers newly eligible for overtime pay. The final rule updates the earnings threshold necessary to exempt administrative and professional employees from the FLSA overtime pay requirements and allows employers to count a portion of bonuses toward meeting that salary level.

In the final rule, the Department is:

  • Raising the “standard salary level” from $455 per week to $684 per week (equivalent to $35,568 per year).
  • Allowing employers to use non-discretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10 percent of the standard salary level.
  • Raising the total annual compensation requirement for “highly compensated employees” from $100,000 to $107,432 per year (of which $684 must be paid weekly).

The final rule is effective Jan. 1, 2020.

We suggest that employers review their payment practices to ensure that any employee who is currently classified as exempt will qualify to remain so under the final rule. Those who do not make at least $684 per week must be re-classified as non-exempt and must be paid overtime pay for hours.

We very much appreciate the opportunity to serve you. Please contact us at 215-675-8364 with any questions or if you require any assistance with these changes.

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