The U.S. Department of Labor announced a final rule to make 1.3 million American workers eligible for overtime pay under the Fair Labor Standards Act (FLSA).

The final rule updates the earnings thresholds necessary to exempt executive, administrative, or professional employees from the FLSA’s minimum wage and overtime pay requirements, and allows employers to count a portion of certain bonuses (and commissions) towards meeting the salary level. The new thresholds account for growth in employee earnings since the currently enforced thresholds were set in 2004. In the final rule, the Department is:

  • raising the “standard salary level” from the currently enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker);
  • raising the total annual compensation level for “highly compensated employees (HCE)” from the currently-enforced level of $100,000 to $107,432 per year;
  • allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level, in recognition of evolving pay practices; and
  • revising the special salary levels for workers in U.S. territories and in the motion picture industry.
The final rule will be effective on January 1, 2020.

Read the DOL Statement on the Final Ruling Here.

Confused About New DOL Overtime Rules? Looking for clarification?

The National Restaurant Association presented a webinar in late May providing initial analysis of the new overtime rules. The webinar was led by attorneys Angelo Amador, senior vice president and regulatory counsel at the NRA, and Alex Passantino, partner at Seyfarth Shaw and former Acting Administrator of the U.S. Department of Labor’s Wage and Hour Division. You can access a recording of the webinar here.  Click here for the webinar slides.

The US Department of  Labor issued a Small Business Compliance Guide.

DOL issued this blog post describing options for employers:

A chalkboard that says "In response to the new overtime rule, employers can" with several options listed out that are described in the blog post.

The Labor Department’s overtime rule simplifies and modernizes the nation’s overtime regulation − to ensure that extra work means extra pay. There is a misperception out there that there is only one way for employers to comply with our new our new overtime rule when they have white-collar employees who earn less than $47,476 per year: change them from salaried to hourly employees. That is just not true.

First, employers have a wide range of options for responding to the changes to the salary level. Employers can choose the one that works best for them. Options include:

  • Raise salary and keep the employee exempt from overtime: Employers may choose to raise the salaries of employees to at or above the salary level to maintain their exempt status, if those employees meet the duties test (that is, the duties are truly those of an executive, administrative or professional employee). This option works for employees who have salaries close to the new salary level and regularly work overtime.
  • Pay overtime in addition to the employee’s current salary when necessary: Employers also can continue to pay their newly overtime-eligible employees the same salary, and pay them overtime whenever they work more than 40 hours in a week. This approach works for employees who work 40 hours or fewer in a typical workweek, but have occasional spikes that require overtime for which employers can plan and budget the extra pay during those periods. Remember that there is no requirement to convert employees from salaried to hourly in order to calculate their overtime pay!
  • Evaluate and realign hours and staff workload: Employers can ensure that workload distribution, time and staffing levels are all managed appropriately for their white-collar workers who earn below the salary threshold. For example, employers may hire additional workers.

Second, based on feedback we heard from the employer community, the overtime rule broadens the definition of salary basis to allow nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary test requirement.

For more detailed guidance on the rule, visit these links:

  • Guidance for employers in the private sector
  • Guidance for employers in the nonprofit sector
  • Guidance for employers in higher education
  • Overtime final rule main page

Nothing in the Fair Labor Standards Act – or in the overtime rule – requires the choice between flexible work arrangements or opportunities for career advancement and complying with basic labor standards. There is no requirement that a worker must have a predetermined schedule, and nothing prohibits working whenever, wherever or however the worker and the employer agree.

Finally, although the FLSA requires that employers keep certain records to ensure that workers get paid the wages they earn and are owed, it’s up to the employer to choose the method that works best for them and the needs of their workforce. There’s no requirement that employees “punch in” and “punch out.” Employers have flexibility in designing systems to make sure appropriate records are kept to track the number of hours worked each day.

Access a recording of the NRA webinar here.  Click here for the webinar slides.