On Sept. 27, the DOL issued a final rule on overtime, officially named Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, which updates and revises the “white-collar” overtime exemption regulations under the Fair Labor Standards Act. The final rule goes into effect on Jan. 1, 2020.
The final rule increases the minimum salary level for exemption from $455 per week ($23,660 annualized) to $684 per week ($35,568 annualized). This level is lower than the threshold of $47,476 in the Obama-era 2016 overtime final rule. In Nov. 2016, a federal court blocked the Obama rule from taking effect nationwide.
In addition, the final rule increases from $100,000 to $107,432 the total annual compensation required for employees to qualify under the shorter highly compensated test. The 2019 proposed rule raised the highly compensated salary threshold to $147,414 per year, which ABC opposed. ABC’s comment letter argued that the DOL should retain the highly compensated salary threshold at the 2004 level of $100,000.
The final rule also allows employers to use commissions, bonuses, and other nondiscretionary incentives that are paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices. According to a Littler Mendelson P.C. analysis, “If incentive payments fall short by even $1, however, employers will owe overtime pay to shorted employees for the entire prior year. Under the final rule, employers will have only a single pay period for a final make-up payment to ensure exempt employees receive the full $35,568 for the year.” ABC’s comment letter argued that the 10% cap should be lifted, or at a minimum raised to 25%.
For more information about the overtime rule and what it means for the construction industry, watch ABC’s webinar What Does the New DOL Final Overtime Rule Mean for Construction Industry Employers?, which is available in the ABC Academy for Construction Ethics, Compliance & Best Practices.
This article is intended for informational purposes only and does not constitute legal advice or opinion.