New Overtime Rules Effective January 1, 2020

The long-anticipated “Final Rule” setting the salary thresholds employers are required to pay in order to satisfy the “salaried basis” requirement for the “white collar” exemptions was released by the US Department of Labor (“DOL”) on September 24, 2019. It will become effective on January 1, 2020. After receiving more than 116,000 comments, the DOL set the new minimum salary requirement at $684/week (or $35,568 annually).  No changes were made in the “duties” tests that a salaried employee must meet to be exempt. Significantly, the DOL declined to adopt the automatic adjustment in the base salary requirement originally proposed during the Obama Administration.

Of equal importance, the DOL decided to benchmark the salary required for the “highly compensated employee” (“HCE”) exemption to the 80th (vs. 90th) percentile for all full-time salaried workers nationwide.  This means that the new salary threshold for the HCE exemption will rise from the current level of $100,000 to only $107,432 as of January 1, 2020.  The Final Rule goes on to state that as long as the employee receives a guaranteed salary of at least $684/week, the remainder of the compensation toward the HCE exemption can be met by payments of non-discretionary bonuses or compensation. Further, employers will now be permitted to make a final “catch-up” payment during the last pay period or within one month after the end of the 52-week period to bring an employee’s compensation up to the required level.  Those who receive $107,432 or more will be exempt from the payment of overtime so long as they meet a “modified duties test:” (i) the employee’s primary duties must be non-manual, office work; and (ii) the employee must customarily and regularly perform at least one of the bona fide duties required of the white collar exemption.

For more information or assistance with implementing this change, contact your Gentry Locke Employment Law Team attorney.

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