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Preparing for the Proposed FLSA Overtime Regulations

The US Department of Labor (DOL) has proposed new regulations that would raise the minimum annual salary level for most employees exempt from the overtime requirements of the Fair Labor Standards Act (FLSA) from $23,660 to $35,308.

The DOL also proposes to:

  • 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 $147,414 the minimum annual salary for highly compensated employees who face a looser duties test;
  • Propose updates to the minimum salary levels every four years through notice-and-comment rulemaking to "prevent the earnings threshold levels from becoming significantly outdated in the future and to provide predictability and certainty for the benefit of workers and employers"; and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 lower the minimum annual salary level to $19,760 for employees in American Samoa.

An additional 1.1 million workers who are currently overtime-exempt will 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.

What to Expect From the Rulemaking Process

The proposed rules were officially published in the Federal Register on March 22, 2019. Their publication opened a 60-day period during which the public, including employer groups, had the opportunity to offer comments.

The DOL is reviewing the comments it received and will potentially make adjustments to the proposed regulations in response to what it hears. After one last review by the White House Office of Information and Regulatory Affairs (OIRA), the DOL will publish a final rule and set an effective date at least 60 days in the future.

The DOL projects that the new regulations will take effect in January 2020.

Prepare for the New Regulations

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