The Department of Labor (DOL) has recently made changes to the Fair Labor Standards Act (FLSA) which defines the federal minimum wage and overtime pay requirements. The changes raise the minimum salary level that is required for employees to be eligible for exemption from the FLSA, specifically the overtime payment requirements. Employees classified as exempt from the FLSA are not required to be paid overtime for hours worked in excess of 40 hours per week.  

The notable changes regarding exempt employees include:

  • Raising the standard salary level for exempt employees from $455 per week to $684 per week for full-year workers ($35,568 per year).
  • Raising the total annual compensation requirement for “highly compensated employees” from $100,000 per year to $107,432 per year.
  • Allowing employers to use non-discretionary bonuses and incentive payments to satisfy up to 10% of the standard salary level.

These new rules take effect January 1, 2020 and are estimated to result in about $173 million annualized direct employer costs over the first 10 years. There were no changes to the duties test used to define exempt employees.

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