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Preparing for the FLSA Overtime Regulations

Effective January 1, 2020, a final rule issued September 24, 2019, by the US Department of Labor (DOL) amends the Fair Labor Standards Act (FLSA) regulations to:

  • Increase the minimum annual salary for most exempt employees paid on a salary basis from its current level of $455 per week (or $23,660 per year) to $684 per week (or $35,568 per year);
  • Allow employers to count nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary level test, as long as they are paid annually or more frequently;
  • Increase from $100,000 to $107,432 the minimum annual salary for highly compensated employees who face a looser duties test; and
  • Maintain the current minimum annual salary level of $23,660 for employees in the US territories of Guam, Puerto Rico, the U.S. Virgin Islands and the Northern Mariana Islands; and of $19,760 for employees in American Samoa.

An additional 1.3 million workers who are currently overtime-exempt are projected to become eligible for overtime unless their employers raise their salaries, reorganize workloads, adjust work schedules or spread work hours in order to avoid payment of overtime pay, the DOL estimates.

Employers should begin preparing to comply with the new regulations as soon as possible, as they will likely involve time-consuming and potentially costly changes.

To prepare for the impact of the new overtime regulations, an employer should consider the following actions: