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FINAL FEDERAL OVERTIME RULES

On September 24, 2019, the U.S. Department of Labor finalized its Rule increasing the salary threshold for the Fair Labor Standards Act’s exemptions for executive, administrative and professional workers (“EAP”). The new Rule will automatically extend overtime pay protections to over 1.3 million workers within the first year of implementation. The key provisions are:

1. The threshold income level at which workers may be exempt from overtime pay of time-and-a-half pay has been increased. The level is currently $23,360 a year. The new level is $35,568 a year (or $684 per week) for a full-time employee.
2. The total annual compensation requirement for highly compensated employees has been increased from $100,000 a year to $107,432 per year.
3. There will not be an automatic update of salary and compensation levels every few years.
4. Employers must comply with the new Rule by January 1, 2020.
The Final Rule does not change any of the existing “job duty” requirements to qualify for an exemption. The DOL expects that the standard salary level set in the Rule will work effectively with the “duties test” to distinguish between overtime-eligible workers and those who may be exempt. Under federal law, non-exempt employees must be paid time and a half for all hours worked more than 40 in a workweek.

EFFECTIVE DATE: January 1, 2020. This leaves employers just over 3 months to ensure their employees meet both the salaried and duties tests to continue to be properly classified as exempt in time for the New Year.

EFFECT: Workers who earn less than $684 per week ($35,568.) will now be eligible for overtime pay if (i) they work more than 40 hours a week; and (ii) they also meet the “job duties” test. Thus, if employees make more than the salary threshold, employers may still conduct an analysis of their job duties. If those duties primarily involve EAP duties as defined by existing regulations, then salaried employees can be deemed as overtime exempt.

Claire Saady is a partner in Saady & Saxe, P.A., and concentrates her practice in the area of employment law. She can be reached at claire@saadyandsaxe.com or 813-909-8855 or 727-291-1900.

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