On September 24, 2019, the U.S. Department of Labor (DOL) announced a final rule to make an estimated 1.3 million American workers eligible for overtime pay under the Fair Labor Standards Act (FLSA). The DOL’s final rule updates the FLSA’s overtime exemptions for executive, administrative and professional employees (EAP) and replaces a currently enjoined rule that had been proffered by the DOL in 2016.

The final rule, like the version proposed earlier this year, raises the salary threshold to qualify for one of the EAP exemptions to $35,568 per year or $684 per week — up from the current $23,660 annual salary that was last updated by the George W. Bush administration in 2004 but about $12,000 lower than the Obama administration's proposed $47,476 cutoff.

The final rule also raises the total annual compensation level for highly compensated employees (HCE) from the currently enforced level of $100,000 to $107,432 per year and allows 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.

The final rule will take effect on January 1, 2020. At a minimum, employers should consider assessing their workforce to determine how many workers will be affected by the proposed new salary threshold.