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Attorney Blog, Human Resources

U.S. Department of Labor Announces Final Overtime Rule

Attorney Harrison Oldham

The U.S. Department of Labor announced a final ruling to make more American workers eligible for overtime pay under the Fair Labor Standards Act (“FLSA”). A copy of the Department of  Labor’s announcement may be found here [https://www.dol.gov/whd/overtime2019/].

Currently, the FLSA says that certain workers who earn less than $23,700 can earn overtime pay under federal law when they work more than 40 hours in a week.  The current threshold was set by the George W. Bush administration in 2004. Prior to that, it had been $8,060 since 1975.

This was not the Department of Labor’s (“DOL”) only recent attempt to revise the FLSA. In 2014, the DOL, then under the Obama administration, tried to double the threshold to include workers earning up to $913 per week ($47,476 per year). However, in 2016, a final rule to change the overtime thresholds was enjoined by the U.S. District Court for the Eastern District of Texas and was subsequently invalidated. This left employers and employees alike in a legal limbo for the last several years.  Perhaps more importantly, as the 2016 final rule was invalidated, the DOL has consistently enforced the 2004 level throughout the last 15 years: $455 per week standard salary level and a $100,000 total annual compensation threshold for highly compensated employees.

Now, the DOL’s final rule updates the earnings thresholds necessary to exempt executive, administrative, and professional employees from the FLSA’s minimum wage and overtime pay requirements and allows employers to count a portion of certain bonuses (and commissions) towards meeting the salary level. The new thresholds account for growth in employee earnings since the currently enforced thresholds were set in 2004. In the final rule, the Department is:

  • raising the “standard salary level” from the currently enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker);
  • raising the total annual compensation level for “highly compensated employees (“HCE”)” from the currently enforced level of $100,000 to $107,432 per year;
  • allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level, in recognition of evolving pay practices; and
  • revising the special salary levels for workers in U.S. territories and in the motion picture industry.

The DOL estimates that 1.2 million additional workers will be entitled to minimum wage and overtime pay as a result of the increase to the standard salary level. The DOL also estimates that an additional 101,800 workers will be entitled to overtime pay as a result of the increase to the HCE compensation level.

The final rule will be effective as of January 1, 2020. However, some states, including New York and California, have already adopted new state level overtime rules that set their salary thresholds around $50,000. Several more states are considering similar proposals, including Colorado, Washington and Pennsylvania.

About Harrison Oldham

Harrison grew up in Mansfield, Texas. He attended Texas A&M University for his bachelor’s degree, where he met his wonderful wife, Kelsey. After graduating magna cum laude from Texas A&M, he attended SMU Dedman School of Law, graduating with honors in 2012. Today, Harrison and his wife live in Dallas, Texas with their son, Teddy.

Since graduating from SMU Law, Harrison has worked exclusively in the field of business law. He has spent time in private practice and in-house, working with clients of every size; from single person startups to Fortune 250 companies. Today his practice focuses on serving the diverse needs of businesses and individuals throughout Texas. You can learn more about Harrison by visiting his website, at: http://lonestarbusinesslaw.com/.

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