Yesterday, (September 24, 2019), the Department of Labor (“DOL”) announced a new final rule, the effect of which will make “1.3 million American workers newly eligible for overtime pay.”

What Changes Will Take Place?

The final rule, which will take effect on January 1, 2020, essentially “updates the salary and compensation levels” for certain employees exempt from the Fair Labor Standards Act (“FLSA”) minimum wage and overtime regulations (i.e. executive, administrative, and professional employees). Specifically, the final rule will:

• Raise the salary basis for executive, administrative, and professional employees from the current $455 per week salary basis to $684 per week (which is equivalent to $35,568 per year);
• Raise the total annual compensation for highly compensated employees (“HCEs”) from the current annual salary of $100,000 to an annual salary of $107,432;
• Allow employers to use nondiscretionary bonuses and incentive payments (to include commissions) that are paid at least annually to satisfy up to ten percent of the salary basis;
• Maintain a special salary basis for employees in U.S. Territories (specifically, $380 per week for American Samoan employees and $455 per week for employees in Puerto Rico, the U.S. Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands); and
• Maintain a special base rate of $1,043 per week (or a proportionate amount based on the number of days worked) for employees in the motion picture producing industry.

What Does This Mean For Employers?

Since the final rule does not take effect until January 1, 2020, there is a chance that a federal court will enjoin (or stop) the final rule from becoming effective. However, until that happens, employers should prepare to transition to the new salary basis and take the steps necessary to ensure that executive, administrative, and professional employees are paid in accordance with the new final rule.

For more information on the DOL’s new final rule and the FLSA regulations, please contact the attorneys at York Bowman Law.