New Salary Level for Overtime Exemptions Effective January 1, 2020

By Tom Peak
Partner, Taylor Porter

Click here for more information from the U.S. Department of Labor

The United States Department of Labor (DOL) has announced the new salary level for overtime exemptions (Executive, Administrative and Professional) will be $35,568 per year ($684 per week). Nondiscretionary bonuses and incentive payments (including commissions), paid at least annually, may be used to satisfy up to 10% of the $35,568 salary requirement. The “highly compensated” employee level will be $107,432 per year.

The final rule will be effective Jan. 1, 2020, and is estimated to make more than 1 million U.S. workers overtime-eligible, according to the DOL. The regulations implement the Fair Labor Standards Act (FLSA)’s overtime mandate.

Among the characteristics of today’s DOL final rule:

  • Employers can count non-discretionary bonuses, incentives including commissions to satisfy up to 10% of the required salary level ($35,568), as long as those bonuses are paid at least annually.
  • The FLSA’s exemption threshold for highly-compensated employees will be set at $107,432, higher than the previous threshold of $100,000.
  • Future updates to the earnings thresholds will occur through “notice-and-comment” rulemaking.

The Department of Labor originally proposed the new overtime rule in March 2019. For 15 years, the minimum salary threshold required for US workers to qualify for the Fair Labor Standards Act’s “white-collar” exemptions from overtime has been $23,660 per year.