On September 24, 2019, the Department of Labor released its Final Rule, modifying the Fair Labor Standards Act’s (“FLSA”) overtime regulations. The Final Rule results in fewer employees being exempt, and more employees being eligible for overtime pay. As such, employers should budget to include additional expenditures in overtime for the coming year. 

Since 2004, there have been no significant changes in the overtime salary thresholds under the FLSA. The Final Rule updates the earning threshold necessary to exempt executive, administrative, and professional employees from the FLSA’s minimum wage and overtime pay requirements, and allows employers to count a portion of certain bonuses and commissions toward the salary minimum. 

The Final Rule, effective on January 1, 2020, raises the salary threshold necessary to meet the executive, administrative, and professional exemptions to $684.00 per week, compared to the former threshold of $455.00 per week, which is equivalent to $35,568.00 per year for a full-year worker. The Final Rule also increases the salary threshold for the “highly compensated” exemption to $107,432.00 per year, a $7,432.00 increase from the prior standard. The Final Rule allows employers to use nondiscretionary bonuses and incentive payments, that are at least paid annually, to meet up to 10% of the salary threshold.

The Final Rule also sets special salary levels of $455.00 per week for employees in Puerto Rico, the U.S. Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands, as well as setting a special base rate of $1,043.00 per week for employees in the motion pictures producing industry. The Department increased this required base rate proportionally to the increase in the standard salary level.