Final Overtime RuleSeptember 25, 2019
On Sept. 24, the U.S. Department of Labor (DOL) announced it will publish a final overtime rule, setting the minimum salary threshold for overtime eligibility at $35,568. It is expected to be published in the Federal Register on Friday, September 27.
The final overtime rule updates the earnings thresholds necessary to exempt executive, administrative and professional employees from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements, and allows employers to count a portion of certain bonuses/commissions towards meeting the salary level.
According to senior DOL officials, the rule will make an estimated 1.3 million additional U.S. workers eligible for overtime pay, and will be effective Jan. 1, 2020. The new thresholds account for growth in employee earnings since the thresholds were last updated in 2004.
The threshold is slightly higher than the $35,308 proposed in the initial draft of the rule and also will allow employers to count non-discretionary bonuses, incentives and commissions as up to 10 percent of an employee’s salary level, as long as those bonuses are paid annually. Essentially, it will raise the “standard salary level” from the currently enforced level of $455 per week to $684 per week (equivalent to $35,568 per year for a full-year worker). The FLSA’s exemption threshold for “highly-compensated employees” will be set at $107,432, lower than in DOL’s initial draft but still higher than the previous threshold of $100,000.
A DOL official said the agency “has not set out a time frame” for any automatic updates to the overtime eligibility threshold beyond what is included in the final rule. The official also said the final rule will not make changes to the FLSA’s “duties test.”
This is perhaps one of the most anticipated final rulemakings from DOL, and it likely won’t be the last before the end of the year. Acting Secretary of Labor Patrick Pizzella recently said DOL will be releasing several proposed and final rules before the year’s end. However, this final rule is expected to draw a legal challenge from worker advocates who have urged the DOL to try to salvage an Obama administration regulation, which was blocked by a federal judge in Texas in 2016.
The 2016 final rule to change the overtime thresholds was enjoined by the U.S. District Court for the Eastern District of Texas on November 22, 2016, and was subsequently invalidated by that court. As of November 6, 2017, the U.S. Court of Appeals for the Fifth Circuit has held the appeal in abeyance pending further rulemaking regarding a revised salary threshold. As the 2016 final rule was invalidated, the Department has consistently enforced the 2004 level throughout the last 15 years.