September 27, 2019
The Department of Labor issued its final overtime rule, effective January 1, 2020, raising the minimum salary for FLSA-exempt employees, while adopting several HR Policy Association recommendations.
Per HR Policy’s comments, the DOL used its 2004 methodology to set the salary level test for exempting executive, administrative, and professional employees from the FLSA’s overtime requirement at $35,568 per year, or $684 per week, compared to $47,476 per year in the old Obama-era rulemaking.
Future increases in the salary level test will be done “regularly” through notice-and-comment rulemaking, per our recommendation, and not every four years as originally proposed.
Nondiscretionary bonuses and incentive payments (including commissions) paid at least annually will be allowed to satisfy up to 10% of the salary level test requirement. Employers will have a single pay period after the 52-week period to make any “catch up” payments.
The new salary level test for highly compensated employees is $107,432, which is reduced from the proposed level of $147,000 that HR Policy noted was too high.
No changes were made to the duties tests.
Legal challenge ahead? Just as the Obama administration's 2016 overtime rule was challenged in court by a coalition of business groups, Christine Owens, executive director of the National Employment Law Project, said “we are confident that legal action will be pursued to challenge this regulation, which was rushed through the usually lengthy regulatory process without any real consideration of the in-depth economic analysis presented by many organizations during the notice and comment period.”
Takeaway: Employers should prepare to comply with the final rule while keeping one eye open for the impact of threatened legal challenges.