New Overtime Rule Impacting PGA Members
The U.S. Department of Labor (the “DOL”) issued a final rule, on September 24, 2019, updating the Fair Labor Standards Act (“FLSA”) by increasing existing compensation thresholds necessary to meet the executive, administrative, and professional exemptions from the minimum wage and overtime requirements of the FLSA. The new rule becomes effective January 1, 2020.
Here are the five key takeaways all members should be aware of:
- Standard Salary Level: The new rule raises the standard salary level requirement from the current $23,660 or $455 per week to $35,568 per year or $684 per week.
- Bonuses and Incentive Pay: The new rule allows employers to use nondiscretionary bonuses and incentive payments, as well as commissions, to satisfy up to 10-percent of the $35,568 minimum salary level. Such bonuses include, for example, nondiscretionary incentive bonuses tied to productivity or profitability (e.g., a bonus based on the specified percentage of the profits generated by a business in the prior year). To qualify for the credit, the bonus and incentive payments must be paid on an annual or more frequent basis.
- Highly Compensated Employees: The total annual compensation cutoff for “highly compensated employees” increases from the current $100,000 to $107,432. (Highly compensated employees are well-paid workers who perform some managerial duties, and typically must satisfy less exacting requirements for being exempt.) To claim this exemption under the final rule, employers must pay workers at least the standard weekly salary level of $684 per week on a salary or fee basis, while the remainder of the total annual compensation may include commissions, nondiscretionary bonuses, and other nondiscretionary compensation.
- Special Salary Levels: The DOL also revised special salary levels for employees in U.S. territories (Puerto Rico, the U.S. Virgin Islands, Guam, and the Northern Mariana Islands) to $455 per week, and the special base rate for employees in the motion picture producing industry to $1,043 per week.
- Duties Tests Remain the Same: Although the changes establish a new standard for salary and fee basis thresholds, it does nothing to alter the existing duties tests for the administrative, executive and professional exemptions or other requirements for the outside sales exemption and computer employee exemption. Of course, states may have more protective laws than the FLSA.
It is conceivable that this new final rule may face legal challenges from worker rights’ organizations and other groups that may seek to prevent it from becoming effective, similar to what occurred in 2016, when a federal court declared the DOL’s then-attempts to increase the compensation thresholds to be invalid. We will continue to monitor any developments.