September 24, 2019
Finally! The Final Overtime Rule is Here!!
On Tuesday, September 24th the U.S. Department of Labor (DOL) issued the final overtime rule (a.k.a. white collar or EAP rule) under the Fair Labor Standards Act (FLSA).
I had the honor of testifying twice before Congress and on behalf of SHRM in 2016 when the previous, proposed rule was pending. I am pleased to see that nearly all of SHRM’s recommendations were incorporated into the new rule. Here are some highlights:
- 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;
- allowing employers to use nondiscretionary 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; and
- revising the special salary levels for workers in U.S. territories and in the motion picture industry.
So, start your due diligence (again). Review the FLSA classification of your employees currently classified as exempt. For those whose current minimum salary is below $684/week, determine your next steps.
- You could reclassify those employees as non-exempt. That will require you to pay overtime for all hours worked over 40 in a work week. Then you may need to consider some options to offset the increased labor costs.
- You could adjust their guaranteed minimum salary to at least $684/week. You might then want to conduct an internal equity analysis to look for wage compression and determine if any subsequent pay increases may be warranted.
- If the employee’s minimum salary is 10% or less below $684/week, consider if you can provide the employee with a nondiscretionary bonus, incentive payment or commissions, paid at least annually to make up the deficit.
- All analyses may best be conducted in conjunction with your in-house financial, human resources and legal/compliance advisors to generate options and finalize a plan that will best meet your business and employee relations goals.