The U.S. Department of Labor (“DOL”) released the final version of its highly anticipated Fair Labor Standards Act overtime and minimum wage exemption rule, setting qualifications for exemption at an annual salary of $35,568. The final rule is effective January 1, 2020.

Change is Coming 

Under the new rule, the salary level threshold will increase from $455 per week (or $23,660 annually) to $684 per week (or $35,568 annually). The increase is in between the current threshold last updated during the Bush administration in 2004 ($23,660) and the increase proposed by the Obama administration in 2016 ($47,476). The DOL estimates 1.2 million currently exempt workers will be eligible for overtime as a result of this increase.

Other changes include:

• Increasing the salary threshold for the so-called “highly compensated employees” from $100,000 to $107,432; and

• A commitment to periodically review the salary threshold, using the notice-and-commenting rulemaking process every four years.

The DOL has indicated that industries most likely to be affected by the new rule are education, wholesale and retail businesses, and businesses that provide professional services.

The rule does not make any changes to the job duties test.

Decisions, Decisions, Decisions 

Employers have until January 1 before the new rule takes effect, forcing quick decisions about employees whose salaries will be below the new threshold and, without any modification, would automatically lose their exempt-status.

It is possible that pro-employee groups will challenge the new rule in court. The Obama administration’s 2016 overtime rule was litigated by business groups, management-side lawyers and workers’ advocates in court.

Stay tuned!