In late September, 2019, 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 changes discussed below will be effective on January 1, 2020.

The final rule updates the earnings thresholds necessary to exempt executive, administrative, and professional employees from the FLSA’s minimum wage and overtime pay requirements, and allows employers to count a portion of certain bonuses and commission 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; and
Allowing employers to use non-discretionary 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.

The Department has formally rescinded the 2016 final rule that increased the standard salary level from $23,660 to $47,476, which was declared invalid by the United States District Court for the Eastern District of Texas. The District Court decision was later appealed to the United States Court of Appeals for the Fifth Circuit, where it was held in abeyance pending the completion of the Department’s rulemaking.

In the final rule the Department reaffirms its intent to update the earnings thresholds more regularly in the future through notice-and-comment rulemaking to avoid lengthy delays between updates, which necessitates disruptively large increase when overdue updates finally occur.

The Department’s final rule is available here.