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On September 24 — more than five years after the Obama administration first proposed updating the overtime regulations of the Fair Labor Standards Act (FLSA) — the U.S. Department of Labor (DOL) released the final version of its long-anticipated rule expanding overtime eligibility for certain employees making less than $35,568 per year. The final rule is largely unchanged from the proposed rule released in March 2019, and the dollar amounts for the exemptions are lower than those in the rule published by the Obama administration in May 2016 — a rule that was enjoined shortly before it was scheduled to go into effect.
Unless specifically exempted by the FLSA, all employees must receive overtime pay for hours worked in excess of 40 hours in a workweek at a rate of not less than 1.5 times their regular rate of pay. Under current law, in order to be eligible for the most common “white collar” overtime exemptions (executive, administrative and professional), an employee must be paid a minimum weekly salary of $455 (or $23,660 per year). In addition to receiving a minimum weekly salary, to qualify for one of the white collar exemptions, an employee must receive the same salary every single workweek regardless of the number of hours worked by the employee and the employee must primarily perform exempt executive, administrative or professional duties as defined by the DOL and courts.
Effective January 1, 2020, the following changes will go into effect:
The duties tests outlining the types of work an individual must perform in order to be exempt are not changing.
Initially, employers should identify all employees presently classified as exempt who are making less than the new salary threshold of $35,568 per year. Options for addressing those employees include:
Employers must continue to be cognizant of and comply with state and local wage-and-hour laws. Most states and some municipalities have their own wage-and-hour standards. If an employer has operations in a state or municipality with stricter wage-and-hour laws, it is incumbent on the business to ensure that its pay practices meet those requirements.
Employers should also consider using the time period before the January 1 implementation date to conduct a privileged review of the job duties performed by employees making a salary in excess of the salary threshold to ensure that these employees are actually performing primarily exempt duties and are properly classified as exempt. Class and collective actions alleging that certain types of employees are improperly classified as exempt are costly and common across all industries.
The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.