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Global Compliance Desk – United States

Overtime Pay Update

The U.S. Department of Labor has declared a final rule to make 1.3 million American workers qualified for overtime pay under the Fair Labor Standards Act (FLSA). 

The final rule updates the earnings thresholds required to exempt executive, administrative and professional employees from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements, and permits employers to count a part of certain bonuses/commissions towards meeting the salary level. In the final rule, the Labor Department is:

  • Raising the “standard salary level” from the currently enforced level of $455 per week to $684 per week (equivalent to $35,568 per year for a full-year worker);
  • Raising the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year;
  • Allowing employers to use non – discretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices; and
  • Revising the special salary levels for workers in U.S. territories and the motion picture industry.

Certain employees are not subject to either the salary basis or salary level tests (for example, doctors and lawyers). The Department’s regulations also provide an exemption for certain highly compensated employees (HCEs) who earn above a higher total annual compensation level ($107,432 under this final rule) and satisfy a minimal duties test.

The final rule is effective on January 1, 2020.

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