FLSA Update: Final Regulations on Overtime Exemptions Likely in 2020

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As businesses move closer to planning their 2020 fiscal year budgets and considering pay increases, they should keep in mind that proposed overtime regulations are nearing final publication by the U.S. Department of Labor.  The new regulations will impact the so-called "white collar" overtime exemptions for executive, administrative, professional, and highly compensated employees under the Fair Labor Standards Act ("FLSA").  If the regulations become final in 2020 as expected, they will increase the minimum compensation levels required for those workers to be classified as exempt from overtime.

Workers who do not meet the higher compensation levels cannot be classified as exempt from overtime under the FLSA.  So, the new regulations may result in the need for businesses to give pay increases to some workers to keep their overtime exemptions in place, or otherwise prepare to pay overtime to workers who no longer meet the minimum compensation levels.

The new regulations, if finalized, will result in the following changes:
  • The minimum salary level for exempt executive, administrative, and professional employees will increase to $679 per week or $35,308 per year.  On an annual basis, this is an increase over $11,000 dollars from the current level set in 2004 ($455 per week or $23,660 per year).
  • For highly compensated employees, the total annual compensation level will increase to $147,414 per year (up nearly $50,000 from the current level of $100,000 per year).
  • To meet the salary level, the proposed regulations will permit employers to include nondiscretionary bonuses and incentive payments, including commissions, to satisfy up to ten percent (10%) of the salary level requirement.
For a more detailed summary and links to DOL fact sheets, please see my post on Womble's FLSA blog.

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