New Overtime Rule

Maureen Murphy is a partner in the Chicago law firm of Kopon Airdo focused on employment law and general corporate law. She recently informed us of the new U.S. Department of Labor (DOL) overtime rule, so I thought I’d let her explain what it means for companies like yours:

The DOL issued its Final Rule regarding the salary that an employee must earn for purposes of determining whether the employee is entitled to overtime compensation, even if that employee is considered an exempt employee by his/her employer. This rule increases the salary level from $455/week to $913/week and $23,660/year to $47,476/year. It takes effect on December 1, and will be updated every three years effective January 1, 2020.   

The Fair Labor Standards Act (FLSA) requires “non-exempt” employees who actually work more than 40 hours per week be paid time-and-a-half for the excess hours worked. An employer’s executive, administrative, professional and outside sales employees are not subject to the overtime requirements. However, in order to be considered exempt, most employees must also earn a certain minimum salary. If the exempt employee earns less than that amount, the employee is considered a non-exempt employee and must be paid time-and-a-half for all hours over 40 actually worked per week. This minimum salary will now be $47,476 per year. Nondiscretionary bonuses, incentives and commissions can count towards as much as 10 percent of the required salary level, as long as employers pay those amounts at least quarterly. 

The new salary level does not apply to certain categories of employees, including outside salespersons. This means that outside salespersons continue to be considered exempt employees, even if their salaries do not exceed $47,476/year. 

The salary level for a “highly compensated employee” has also been increased to $134,004. Here, exemptions for overtime requirements include: that they receive at least $47,476/year on a salary or fee basis, while the balance of the annual salary amount can be made up from commissions, nondiscretionary bonuses, and other nondiscretionary compensation; that they qualify as an executive, administrative or professional employee; and that their primary duties must be office or non-manual work. 

The rule does not change the basic “duties” test for determining whether an employee is exempt or non-exempt. An employee is not an exempt employee simply because he/she receives a salary of $47,476 or higher. Visit short.moldmakingtechnology.com/overtime for more on the tests for this determination.

If you have questions on how the new Final Rule will impact your company, feel free to contact Maureen at mmurphy@koponairdo.com.