DOL Announces Final Overtime Rule under the FLSA

On September 24, 2019, the U.S. Department of Labor (“DOL”) announced a long anticipated final rule (the “Overtime Rule”) that affects whether certain employees may be treated as exempt from the minimum wage and overtime pay requirements of the federal Fair Labor Standards Act (“FLSA”). DOL estimates that the new Overtime Rule will extend overtime protections to an additional 1.3 million currently exempt workers who can no longer be classified as exempt once the new rule is effective on January 1, 2020.

Summary of the Overtime Rule

To be considered exempt under the FLSA, employees classified as executive, administrative, professional, outside sales and computer employees (“white collar employees”) and highly-compensated employees must meet certain requirements related to their primary job duties and must generally be paid on a salary basis at not less than a specified salary amount. The new Overtime Rule will make the following changes to the exemptions available for white collar employees and highly-compensated employees:

• Employees who meet the duties test for the white collar employee exemption must generally earn at least $684 per week (the equivalent of $35,568 per year) in order to be exempt from minimum wage and overtime pay requirements. This is a significant increase from the previous salary threshold of $455 per week (the equivalent of $23,660 per year). The new amount equals the 20th percentile of earnings of full-time salaried workers in the lowest wage Census region (currently the South).
   
• Special salary levels apply to the U.S. territories: $455 per week (the equivalent of $23,660 per year) for Puerto Rico, the U.S. Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands; and $380 per week (the equivalent of $19,760 per year) for American Samoa.
   
• Employers are permitted to count nondiscretionary bonuses, incentive payments, and commissions towards up to 10 percent of this salary requirement, provided that these forms of compensation are paid at least annually.
   
• Highly-compensated employees (HCEs), who are subject to a more minimal duties test to qualify for the exemption, must earn at least $107,432 per year (up from the previous amount of $100,000 per year). This amount equals the 80th percentile of earnings of full-time salaried workers nationally.
   
• The DOL intends to update the standard salary level and HCE total compensation threshold more regularly, but the final rule does not commit to updating them every four years (as originally proposed) or require automatic updates.
   
• The Overtime Rule does not make any changes to the duties test for the white collar employee exemption.
   
• The changes in the Overtime Rule will take effect on January 1, 2020.

CAPLAW is continuing to review the Overtime Rule and accompanying DOL discussion, and will update our website with additional information and a new FAQ in the coming weeks. If your CAA has any questions about the applicability of the FLSA to your organization or the impact of the new Overtime Rule, please contact CAPLAW to discuss them with one of our attorneys.

For additional information on the Overtime Rule, please see the following:

The Final Overtime Rule
DOL’s Resource Page on the Overtime Rule
DOL’s Fact Sheet on the Overtime Rule
DOL’s FAQs on the Overtime Rule

This News Flash is part of the Community Services Block Grant (CSBG) Legal Training and Technical Assistance (T/TA) Center. It was created by Community Action Program Legal Services, Inc. (CAPLAW) in the performance of the U.S. Department of Health and Human Services, Administration for Children and Families, Office of Community Services Cooperative Agreement – Grant Award Number 90ET0467-02. Any opinion, findings, conclusions, or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the U.S. Department of Health and Human Services, Administration for Children and Families.

The contents of this news flash are intended to convey general information only and do not constitute legal advice. Any communication through this publication or through CAPLAW’s website does not constitute or create an attorney-client relationship. If you need legal advice, please contact CAPLAW or another attorney directly.