Turner Padget Insights

DOL Proposes Changes to Overtime Rules: What Employers Need to Know

Posted On March 12, 2019

On March 7, 2019, the United States Department of Labor (“DOL”) announced a proposed new rule regarding overtime eligibility under the Fair Labor Standards Act (“FLSA”). The DOL estimates that the proposed rule, if enacted, stands to make more than one-million American employees eligible for overtime.

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Overview of Proposed Changes

The Department of Labor suggests the following changes to the current overtime rule, beginning January 1, 2020:

• Increase the minimum salary required for an employee to qualify for exemption (the salary threshold) from the currently-enforced level of $455 ($23,660 annually) to $679 per week (equivalent to $35,308 annually);
• Increase the total annual compensation requirement for “highly compensated employees” (HCE) from the currently-enforced level of $100,000 to $147,414 per year;
• Commit to periodic review to update the salary threshold (every four years); and
• Allow employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10 percent of the standard salary level

If enacted, the proposed rule will lead to the reclassification of many currently exempt employees as non-exempt employees entitled to overtime for hours worked over 40 hours in a workweek.

Even with these changes, it is important to keep in mind that meeting the newly proposed salary threshold does not automatically make an employee exempt for overtime pay. The employee’s job duties must also primarily involve executive, administrative or professional duties as defined by the FLSA. The proposal does not propose changes to the job duties test.

Employer Response

The Department is currently considering all timely comments prior to developing a final rule. If approved, the rule is expected to go into effect January 1, 2020.

In the interim, employers should take this time to review and audit the compensation, job description, and duties of their current employees. Employers should also contact their employment counsel for assistance in developing the most efficient and effective way to navigate the proposed changes.