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DOL Issues New Federal Overtime Rule

September 26, 2019

Original content c/o: National Restaurant Association

The regulation is set to take effect Jan. 1, 2020.

The US Department of Labor Sept. 24 released a new federal overtime regulation.

The rule revises the Fair Labor Standards Act (FLSA) test for determining when an employee is exempt from earning overtime pay, also known as the “white collar” overtime exemptions.

The Department estimates that 1.2 million additional workers will be entitled to overtime pay as result of the increase to the standard salary level. The final rule will be published in the Federal Register Sept. 27, 2019.

Following is a summary of the final rule’s key provisions:

$35,568 threshold
The rule sets the salary threshold at $35,568 per year ($684 per week), which is slightly higher than the Department’s initial $35,308/per year level in an earlier proposed rule.

Bonus and incentive payments
The DOL rule also permits employers to use non-discretionary bonuses and incentive payments to satisfy up to 10 percent of the standard level on an annual basis. Any shortages will have to be made up in the following pay period.

No automatic increases to salary level
DOL reaffirms its intent to update the salary threshold more regularly in the future through notice-and-comment rulemaking, given that the salary threshold becomes substantially less effective over time and that lengthy delays between updates create larger increases when long overdue updates finally occur.

No changes to the duties test
There are no changes to the "Duties Test". For more on this click here.

Rejects regional variations in salary level
The rule notes that variations are too complex. The question was posed in the Department’s 2017 Request for Information, issued prior to its proposed rule.

Effective Jan. 1, 2020
The final rule is effective January 1, 2020. This will give employers more than 3 months to come into compliance.

As you may recall, the Obama overtime regulation was challenged by business groups and state attorneys generals and was invalidated in 2017 by US Federal District Judge Amos Mazzant in the Eastern District of Texas. Judge Mazzant ruled that the regulation was beyond the statutory authority of the Secretary because the salary threshold was such a drastic increase it made the duties test, a key determinant for exemption, no longer relevant. The Department of Justice (DOJ) on behalf of the DOL, appealed the decision to the Fifth Circuit Court of Appeals and the appeal is currently being held in abeyance pending a DOL rewrite of the regulation.

Clire here to review the DOL website for background details and news on the rule.