Posted by NAR:

U.S. Department of Labor (“DOL”) published its Final Overtime Rules (“Final Rules), amending the Fair Labor Standards Acts overtime provisions, which will take effect January 1, 2020.

Below is a list of items you’ll want to keep in mind regarding the Final Rules:

1) Minimum Salary Level – The new minimum salary level is $684 per week (equivalent to $35,568 per year for a full-year worker).

(Note: The new minimum salary level is higher than the amount announced in the Proposed Rule ($679 per week), but less than the amount ($913 per week) the Obama Administration attempted to promulgate in 2016.)

2) Highly Compensated Employee Level – The Final Rules raised the total annual compensation requirement for “highly compensated employees” from $100,000 per year to $107,432 per year. The total annual compensation must include a guaranteed minimum salary of $684 per week, which means no portion of the salary can rely upon a commission or non-discretionary bonuses. Compensation beyond the $684 per week may be paid in commissions, bonuses and other types of non-discretionary bonuses. Payments for employee’s insurance (e.g. medical, life), retirement plans, lodging, or fringe benefit costs do not count towards the threshold level of $107,432.

(Note: The new annual compensation requirement is lower than the amount ($147,414) announced in the Proposed Rule.)

3) Ten Percent (10%) Rule – Employers may pay up to 10% of the minimum salary level of $684 in commissions or non-discretionary bonuses, like those based on individual work performance, productivity or hours worked, company performance, safety, retention and any other like bonuses. If even after payments of commissions or bonuses, an employee’s salary falls short of the minimum salary level by the end of the year, employers will have only one pay period to make up the difference. Otherwise, the employee will be classified as a non-exempt employee, and the employer will owe overtime for all hours worked over 40 in each workweek during the entire prior year.

4) Future Increases to the Salary Levels – In contrast to its 2016 plan, the DOL will not increase the minimum salary and highly compensated levels automatically. These levels may only be increased after providing public notice and an opportunity to comment on any proposed increases. The DOL did, however, indicate that it intends to update the levels regularly.

5) Check Your State Law – The Final Rules do not prevent states from enacting higher minim salary levels for exemption. States such as Alaska, California, Maine and New York have minimum salary levels that are or will be higher than the federal threshold of $684 per week. Therefore, an employer in any of these states must pay their employees the higher minimum salary level in order to preserve an employee’s exempt status under state law. It also appears that states with similar overtime or exemption requirements have not adopted a rule similar to the 10% rule, which means employers in those states cannot count commissions or non-discretionary bonuses towards an employee’s minimum salary level.

Here are some additional resources about the DOL’s Final Overtime Rules. If you have any questions or need assistance with anything, please don’t hesitate to contact the NAR Legal Affairs team.

DOL Press Release: https://www.dol.gov/newsroom/releases/whd/whd20190924

Notice for Final Rule: https://www.federalregister.gov/documents/2019/09/27/2019-20353/defining-and-delimiting-the-exemptions-for-executive-administrative-professional-outside-sales-and

DOL FAQ: https://www.dol.gov/whd/overtime2019/overtime_FAQ.htm

DOL Fact Sheet: https://www.dol.gov/whd/overtime2019/overtime_FS.htm

Posted by: Byron King on 10/21/19 (This information is only accurate as of 10/21/19. You must contact SCR for updates and changes to this information after 10/21/19 as laws and regulations may change over time. SCR 803-772-5206 or email info at screaltors.org)