The Department of Labor (DOL) issued a final rule on September 24, 2019, updating the salary threshold for exempt employees. Now, employees making less than $35,568 a year cannot be considered exempt and must earn overtime pay beginning January 1, 2020. According to the U.S. Department of Labor, the new threshold will make 1.3 million workers eligible for overtime pay.
The new rule raises the previous salary threshold for exempt employees to $35,568 ($684 a week) from $23,660 ($455 a week). Employees who are paid a salary of at least the threshold amount annually and who pass specific duties tests will still be exempt from earning overtime pay under the Fair Labor Standards Act (FLSA). Those who do not meet the updated salary threshold will be eligible for overtime pay of 1½ times their regular hourly rate for working more than 40 hours in a single workweek.
Employers should begin taking a close look at the status of each worker and weigh the costs of raising employee salaries above the updated threshold against reclassifying current employees to nonexempt and paying them overtime.