Overtime Rule Update Finalized by Department of Labor

Earlier this year, the Department of Labor (DOL) issued a proposed rule as part of its consideration of potential revisions to the Fair Labor Standards Act (FLSA) to update the exemption from minimum wage and overtime pay (of 1.5 times their regular pay rate) for “executive, administrative, professional, outside sales, and computer employees.” PIA National submitted comments in response to the proposed rule earlier this summer, and our views on the issue can be found in an earlier post.

The proposed rule was recently finalized and will go into effect on January 1, 2020. It updates the standard salary level to reflect growth in wages and salaries and allows incentive payments, like commissions, to count toward up to 10 percent of the standard salary level. The DOL’s intention going forward is to propose updates to the salary threshold every four years.

Here are the relevant changes to the overtime rule:

  • raising the “standard salary level” from the currently enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker); this is the amount that was in the proposed rule on which we commented earlier this year);
  • raising the total annual compensation level for “highly compensated employees (HCE)” from the currently-enforced level of $100,000 to $107,432 per year; and
  • allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level, in recognition of evolving pay practices (this also reflects the proposed rule issued earlier this year).

Allowing incentive payments like commissions to count toward up to 10 percent of the standard salary level is meant to modernize the rule to more accurately reflect current employment practices. The new salary threshold of $679 per week keeps the 2004 methodology, while updating the level to reflect wage growth since 2004.

PIA National is pleased to see DOL’s commitment to the ongoing reexamination of the efficacy of the overtime rule every four years and allowing for public comment during each reexamination. This will offer businesses and the DOL an opportunity to examine the way the rule is working and identify changes that may be needed before they turn into crises.

PIA National looks forward to continuing to work with DOL to implement the update to the overtime rule in a way that works for independent insurance agents and the rest of the nation’s workforce.

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