DOL Issues a New Overtime Pay Rule

The United States Department of Labor’s (“DOL”) announced a new rule for overtime pay for around 1.3 million workers. The rule was last updated about 15 years ago. Under the new provision of the Fair Labor Standards Act (“FLSA”) some exemptions have been added as per the requirements, and codified at 29 CFR § 541 [FLSA 13(a) (1)]. The rule is to be effective from January 1, 2020.

As per the new rule, the DOL increasing the minimum salary requirement for positions to qualify as exempt from the Fair Labor Standards Act’s (“FLSA”) overtime requirements by 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 [FLSA 13(b)(1)]. These revisions are also applicable for workers in United States territories and the motion picture industry (29 CFR § 541.709).

It should also be noted by employer that salary is only one element of the exemption classification. The exempted employee is obligated to perform its duties mentioned in the applicable exemption.

It is high time for employers to ensure whether their employees are categorized appropriately in view of their pay and duties. Employers would consider different options before implementing the final rule, including, firstly to raise salaries of employees who are near to this new rule and therefore maintain the employees’ exempt status. Secondly, employers should be paying their employees on a salary basis and reimburse them for overtime hours that exceed forty in a workweek. Thirdly, employees working regularly for more than 40 hours should be compensated for at “straight time” for hours in excess of 40 hours. Next, employees be paid on an hourly basis. Employer should also eliminate some task for non-exempt workers, to keep their work hours under 40.

This rule makes it mandatory for employers to maintain timekeeping records for employees who never keep a close track of their working hours. Employers should also be required to keep a track of the use of leave time for salaried workers and maintain records of employees who qualify for overtime work. Employers should accept these changes willingly and be obligated to address these issues if arising from these changes.