On Sept. 24, 2019, the U.S. Department of Labor (DOL) announced a new final rule that updates the salary thresholds that some individuals must meet in order to qualify for a minimum wage and overtime exemption under the federal Fair Labor Standards Act (FLSA). The final rule becomes effective on Jan. 1, 2020.
2019 Overtime Final Rule
The final rule affects the exemptions for executive, administrative and professional (EAP) employees, highly compensated employees (HCEs), employees in the motion picture industry and individuals who work in various U.S. territories.
The final rule’s salary levels differ from both the 2016 and 2019 proposed levels. For 2020, the final rule EAP and HCE salary exemptions are as follows:
- Standard salary level: $35,568 per year ($684 per week)
- HCEs: $107,432 per year
The DOL intends to update the standard salary and HCE total annual compensation levels more regularly in the future through notice-and-comment rule-making.
Employer Action Steps
To prepare for the final rule’s Jan. 1, 2020 effective date, employers should:
- Determine which currently exempt employees have salaries below the new threshold.
- Decide whether to increase salaries for these individuals or reclassify them as nonexempt employees.