BREAKING: Final OT rule on the way -- will take effect 1/1/20

More to come, but here's a peek.

We'll have more on the Final Rule regarding the overtime exemptions under the Fair Labor Standards Act, which will be released on Thursday. Meanwhile, here is a sneak preview from Marc Freedman of the U.S. Chamber of Commerce:

This morning, on a conference call with media, the Department of Labor announced that the final overtime regulation was finished and provided some basic details about its contents.  The full regulation will be released this Thursday, and in the Federal Register on Friday.  In general, it is very consistent with the Chamber’s comments:

  • Salary threshold for administrative, executive, and professional employees (the “white collar” exemptions) will now be $684/week, or $35,568/year. This will replace the current threshold, in place since 2004, of $455/week or $23,660/year. The final threshold is slightly higher than what was proposed at $679/week and $35,308/year.
  • The Highly Compensated Employee threshold will go from $100,000 (in place since 2004) to $107,432. The proposed level was $147,414 and the Chamber criticized this as too high.
  • There are NO changes to any of the duties tests as the Chamber urged.
  • There are NO automatic updates included as the Chamber urged.
  • Employers may 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. Any shortages will have to be made up in the following pay period.  The Chamber recommended a higher threshold than 10%, and a longer window for an employer to make catch-up payments.
  • The final regulation will be effective January 1, 2020.  This will give employers slightly more than 3 months, but because the salary threshold adjustment is more modest than what the Obama administration issued, the amount of employee reclassifications and other disruptions should hopefully not be overly burdensome.

As you will recall, the Chamber led the litigation to challenge the Obama administration’s OT regulation (salary threshold of over $47,000) which resulted in that regulation being invalidated by a federal judge in Texas.  That ruling was appealed by the Department of Justice and the proceedings were suspended pending the outcome of this rulemaking.  We will wait to see how the DOJ proceeds with their appeal, but the obvious action would be to move for withdrawal of the appeal based on this rulemaking mooting the need for an appeal.

Robin Shea has 30 years' experience in employment litigation, including Title VII and the Age Discrimination in Employment Act, the Americans with Disabilities Act (including the Amendments Act). 
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