On Sept. 24, the Department of Labor announced that it will issue a final overtime rule that raises the minimum salary threshold for salaried exempt employees from $455 per week to $684 per week ($35,568 per year). This follows a similar but more expansive rule proposed in 2016, which would have raised the salary level to $47,476 per year.
It is estimated that under the new threshold, more than one million additional US workers will become eligible for overtime pay. The final rule goes into effect on January 1, 2020.
In addition to raising the minimum salary level, the new rule also raises the highly-compensated exemption threshold from $100,000 to $107,432.
Unlike the regulations proposed in 2016, the new rule will not include automatic updates to the minimum salary threshold, and there will be no changes to the current “duties tests.”
How Employers Can Prepare
Under the new rule, any currently salaried exempt employee making under $35,568 per year will be eligible for overtime pay, regardless of their title or duties. Similarly, employees making under $107,432 may now be eligible for overtime pay, based on the duties test.
Employers should identify any employee earning below $35,568 per year and determine whether to reclassify these employees as non-exempt, and therefore eligible for overtime pay, or increase their salary to meet or exceed the new Minimum Salary Threshold.
It is important to note, however, that simply making more than $35,568 per year does not automatically guarantee that an employee is exempt from overtime. Employers must also analyze specific job duties to determine if a role can be classified as exempt under the established duties tests to maintain compliance.
Employers should also keep in mind that some states’ minimum salary threshold exceeds that of the federal threshold (New York, for instance), and therefore are not impacted by the new Overtime Rule. Similarly, some states, such as Pennsylvania, do not recognize certain exempt categories such as the highly-compensated exemption that fall under the FLSA.
For additional information about the new Overtime Rule and how it will impact your business, contact Dennis Shrenk, Compensation Practice Director, at 215-654-9140 ext. 407 or firstname.lastname@example.org.