The Fair Labor Standards Act (FLSA) is the federal law that requires certain classifications of employees to be paid an overtime premium for working more than forty hours in a week. However, employees that perform certain job duties may be exempt from the law’s overtime payment requirements if they are paid a guaranteed weekly salary. Effective January 1, 2020, the weekly salary threshold is going to increase. In summary, the new rules raise the salary threshold for white-collar employees to $684 per week (the annual equivalent of $35,568) and increase the total annual compensation requirement for the highly compensated employee exemption to $107,432 per year. The current thresholds, set in 2004, are $455 per week ($23,660 annually) and $100,000 per year for highly compensated employees.
That said, the updated salary thresholds may not be the heavy burdens many employers fear they are. Consider the following:
- Employers can now count a portion of bonuses or commissions towards meeting the salary level. The new rule allows employers to use nondiscretionary bonuses and incentive payments, including commissions (paid at least as frequently as on an annual basis), to satisfy up to 10% of the standard salary level.
- The new rule does not eliminate or change the established duties test. Employers can still use the same job-related criteria when determining if an employee is or is not eligible for overtime pay.
- The DOL initially sought a far greater increase in minimum salary levels. A version of the rule proposed in 2016 would have raised the thresholds to $913 per week ($47,476 annually) and, for highly compensated employees, $134,004 per year.
- The DOL cannot issue another update without warning. The prior version of the rule mentioned above would have instituted automatic increases in salary and compensation levels every three years. This version ensures that employers will have a period to learn about and comment on further proposed changes before they become law.
If you have questions about the updates to federal overtime law or need assistance in preparing for the January 1st deadline, speak to an experienced legal advisor sooner rather than later. A labor attorney can help your business quickly and cost-effectively institute new payment and employment practices. For help with this or any labor and employment issue, don’t hesitate to contact me.
ABOUT RUSSELL BERGER
As an accomplished labor and employment attorney and Practice Group Director, Mr. Berger provides business counsel to employers on employee matters and is well-versed in litigating in both state and federal courts. Russell Berger is the trusted legal counsel every business owner needs to feel confident in their decision-making and secure with their assets. As a Practice Group Director at Offit Kurman, Mr. Berger has direct experience with managing other managers, which he draws from in advising his clients. He is a pragmatic problem-solver that works efficiently and tirelessly to present his clients the best possible solutions to their most complicated issues. He represents employers, businesses, and professionals in employment disputes across the nation.
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