The Department of Labor on Tuesday announced a final rule that would make 1.3 million American workers newly eligible for overtime pay.

The final rule updates the earnings thresholds necessary to exempt executive, administrative and professional employees from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements, and allows employers to count a portion of certain bonuses/commissions towards meeting the salary level. The new thresholds account for growth in employee earnings since the thresholds were last updated in 2004.

In the final rule, the Department is raising the “standard salary level” to $684 per week (equivalent to $35,568 per year for a full-year worker) from $455 per week. The Department is also raising the total annual compensation requirement for “highly compensated employees” to $107,432 per year from the currently enforced level of $100,000 per year.

The Department is also allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to ten percent of the standard salary level.

The final rule is effective on January 1, 2010.

A 2016 final rule to change the overtime thresholds was enjoined by the U.S. District Court for the Eastern District of Texas on November 22, 2016, and was subsequently invalidated by that court. That 2016 rule set the salary threshold at the 40thpercentile of full-time salaried workers’ weekly earnings in the South census region, an increase from the 2004 rule’s 20thpercentile threshold.

As of November 6, 2017, the U.S. Court of Appeals for the Fifth Circuit has held the appeal in abeyance pending further rulemaking regarding a revised salary threshold. As the 2016 final rule was invalidated, the Department has enforced the 2004 salary thresholds since the rule’s inception.

 

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