The U.S. Department of Labor recently announced a change to the Fair Labor Standards Act (FLSA) that will make over a million more American workers now eligible for overtime pay. Business owners should be aware of this new rule, which goes into effect on January 1, 2020.

The new rule changes the earnings threshold necessary to qualify for the executive, administrative, or professional employee exemptions under the FLSA’s minimum wage and overtime pay requirements, as well as the annual compensation level required to qualify as a highly compensated employee. The current salary levels were set in 2004 and the update accounts for growth in employee earnings since then.

The new rule will raise the “standard salary level” from $455 per week, to $684 per week, which equals $35,568 per year. This means that employees earning less than $35,568 a year will be entitled to overtime pay if they work over 40 hours a week. However, the rule will allow employers to use nondiscretionary bonuses and incentive payments, paid at least annually, to satisfy up to 10% of the standard salary level. Additionally, the rule will raise the total annual compensation level for “highly compensated employees” from $100,000 to $107,432 per year.

Under this change, employees will not be exempt from overtime and minimum wage rules as “highly compensated employees,” unless their total annual compensation is at least $107,432. Lastly, the rule will revise the special salary levels for workers in U.S. territories and in the motion picture industry.

For guidance regarding how this legislation affects your business, contact the employment law experts at General Counsel, PC today at 703-556-0411.