DOL Unveils Final Rule Adjusting Overtime Pay Exemption Threshold At Last

Author:Mr Nicholas Reiter, Cynthia (Cindy) M. Lewin, George E. Constantine and David A. Katz
Profession:Venable LLP

On September 24, 2019, the U.S. Department of Labor (DOL) unveiled its long-awaited final rule under the Fair Labor Standards Act (FLSA) adjusting the overtime pay exemption threshold from $23,600 to $35,568. This increase is a critical change for the many nonprofit organizations that have workers earning less than $35,568 but more than $23,600, as they may now have to pay such workers overtime.

Effective January 1, 2020, employees who make less than $35,568 will be entitled to overtime pay at a rate of one and one-half times the employee's regular rate of pay for all hours worked beyond 40 hours in a workweek. Employees who (i) make $35,568 or more on a salary basis and (ii) perform duties that fall within one of the long-established exemptions from overtime pay (e.g., executive, administrative, or learned professional duties, among others) are exempt from the overtime pay requirement under federal law. Note, however, that some states, such as New York, set their own overtime exemption thresholds, which can far exceed $35,568.

The $35,568 figure is substantially lower than the $47,500 figure previously proposed by the Obama administration. Furthermore, while the proposed Obama administration rule included a mechanism to automatically update the exemption threshold every three years, this final rule includes no such mechanism and is instead a one-time change.

In order to prepare for the January 1, 2020 effective date, nonprofit employers should adjust the exemption...

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