On September 24, 2019, the United States Department of Labor issued its final rule to implement changes to the Fair Labor Standards Act’s (FLSA) overtime pay requirements. The final rule updates the salary thresholds necessary to exempt executive, administrative and professional employees from overtime, and allows employers to count a portion of certain bonuses/commissions towards meeting the salary level. The final rule is effective Jan. 1, 2020 and is estimated to extend overtime protections to more than one million workers who are not currently eligible under federal law.
Here are the details of the final rule:
- The minimum salary required for an employee to qualify for the executive, administrative and professional overtime exemptions has increased from the currently-enforced federal level of $455 (or $475 under Connecticut law) to $684 per week (equivalent to $35,568 a year). Thus, workers who do not earn at least $35,568 a yearwould have to be paid overtime, regardless of their job duties. The Department of Labor further intends to propose updates to the salary threshold regularly to ensure that these levels continue to provide useful tests for exemption. Updates would not be automatic and would continue to require notice-and-comment rulemaking.
- Nondiscretionary bonuses and incentive payments (including commissions) paid on an annual or more frequent basis may be used to satisfy up to 10 percent of the standard salary level. Such bonuses include, for example, nondiscretionary incentive bonuses tied to productivity or profitability (e.g., a bonus based on the specified percentage of the profits generated by a business in the prior year). If an employee does not earn enough in nondiscretionary bonuses and incentive payments (including commissions) in a given 52-week period to retain his or her exempt status, the Department of Labor will further permit a “catch-up” payment at the end of the 52-week period. The employer will have one pay period to make up for the shortfall (up to 10 percent of the standard salary level for the preceding 52-week period). Any such catch-up payment will count only toward the prior 52-week period’s salary amount and not toward the salary amount in the 52-week period in which it was paid. If the employer chooses not to make the catch-up payment, the employee would be entitled to overtime pay for any overtime hours worked during the previous 52-week period.
Finally, it is important to note that the final rule:
- Includes no changes to the job duties test for exempt employees. Accordingly, to qualify for exemption, employees will still need to perform as their “primary duty,” duties identified as exempt under the executive, administrative, or professional exemptions.
- Includes no changes to the mechanics of the “salary basis test.” Thus, subject to limited exceptions, in each pay period, the employee must still receive at least the minimum salary, which cannot be subject to reduction because of variations in the quality or quantity of work performed.
If you’re an employer and have questions about labor and employment law, including the new overtime rules, consider calling one of our attorneys at Kainen, Escalera & McHale in Connecticut. We do one thing and one thing only – we are an employer defense law firm – in fact, we are one of the largest employer defense law firms in the region. What’s more, each of our attorneys has over 25 years of experience in employment law and labor law matters and can provide your business with comprehensive legal counsel ranging from assistance with necessary preventive measures to trial advocacy. Please contact us if we can help you.
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