On September 24, 2019, the United States Department of Labor (“DOL”) announced a Final Rule updating the overtime regulations for what are commonly referred to as the “White Collar” exemptions of the Fair Labor Standards Act (“FLSA”), including the Professional, Executive and Administrative exemptions. The Final Rule has been submitted to the Office of the Federal Register for publication and is currently awaiting publication in the Federal Register; it is possible the Final Rule published in the Federal Register may vary slightly from the Final Rule as announced by the DOL. The Final Rule is scheduled to go into effect on January 1, 2020. The key changes being made to the current FLSA regulations by the Final Rule as announced by the DOL are as follows:

  • The salary level requirement will increase from $455 weekly ($23,660 annually) to $684 weekly ($35,568 annually).
  • The total annual compensation requirement necessary to satisfy the Highly Compensated Employee exemption will increase from $100,000 annually to $107,432 annually.
  • Up to 10 percent of the new standard salary level requirement can come from nondiscretionary bonuses and incentive payments (including commissions), if the bonuses or incentive payments are made at least annually. Previously, bonuses and incentive payments could not be considered for purposes of the salary level requirement.

The DOL estimates that as a result of the Final Rule, 1.3 million workers who are currently exempt will become nonexempt, and therefore entitled to overtime pay. While the Final Rule does not change the duties required to satisfy the “White Collar” exemptions, now is a good time for all employers to review the duties of their exempt employees to ensure they are in compliance with the duty requirements of the “White Collar” exemptions. In addition, employers should evaluate their compensation plans and budgets, as currently exempt employees may become nonexempt (and thus entitled to overtime) because they do not meet the new requirements. Employers should take steps to bring their workforce into compliance with the new regulations set forth in the Final Rule before they go into effect on January 1, 2020. Information on the announcement of the Final Rule can be found on the DOL – Wage and Hour Division website at: https://www.dol.gov/whd/overtime2019/.