Friday, September 27, 2019

More Changes to FLSA Overtime Rule

On Wednesday we reported on the issuance of the DOL’s final rule on FLSA overtime and exemptions. The major amendment to the current rule, of course, is the increase in the salary threshold from $455 a week ($23,660 annually) to $684 a week ($35,568 annually) without a change to the duties test for white-collar exemptions. Other amendments to the rule include the following:

  • Raising the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year;
  • Allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices; and
  • Revising the special salary levels for workers in U.S. territories and the motion picture industry.

Employees who are paid $107,432 as a base salary or up to 10% of that amount paid as nondiscretionary bonuses or incentive, meet the highly compensated employment requirement and can be automatically exempted. Be aware that this salary threshold is considered using base pay and no more than 10% of nondiscretionary bonuses or incentive payments. Therefore, employers cannot consider large year-end bonuses or commissions as a basis to declare an otherwise nonexempt position to be exempt.

Finally, while it is appropriate to consider the annual salary as the threshold amount for exempt status, the salary test also requires that the employee is paid a set amount notwithstanding the number of hours worked in a week and without other deductions which might destroy the salary test. In this, it is important that employees also earn the weekly threshold amount. Fluctuating weekly salary amounts must individually be at least $684 as of January 1st except to the extent that there can be up to 10% annual bonus or incentive payment credit.