DOL Issues Final Regulations on Overtime Pay and Exemptions for Certain Classes of Employees

The Department of Labor’s (DOL) Wage and Hour Division has issued final regulations on overtime pay, and, specifically, exemptions from overtime pay for certain “executive, administrative, professional, outside sales and computer employees.”

The Fair Labor Standards Act (FLSA) requires certain covered employees to be paid a minimum wage and—for employees who work more than 40 hours in a week—to receive “overtime premium pay that is at least 1.5 times the regular rate of pay.” Certain classes of employees—generally salaried employees—are exempt from this requirement, but there are salary levels below which an employee would nevertheless be considered eligible for overtime pay.

The Wage and Hour Division issued a request for information (RFI) in July 2017, seeking public input that might be helpful in rewriting previously issued final regulations regarding overtime pay and exemptions. Information gathered following this RFI led to the agency’s issuance of proposed regulations in March 2019, and now—six months later—their issuance in final form.

These final regulations address salary levels in the context of overtime pay eligibility, the inclusion of bonuses, incentive payments and commissions in salary level requirements, treatment of highly compensated employees, and future updates to earnings thresholds.

While employers or their plan administrators generally make compensation determinations for retirement plan purposes, some feel this DOL guidance could affect not only compensation for benefits purposes, but potentially plan design.

The effective date of these final regulations is January 1, 2020.