Federal Overtime Changes Effective Jan. 1, 2020

Notice to state agencies and institutions of higher education: U.S. Department of Labor (DOL) rules on the white-collar exemption from the Fair Labor Standards Act (FLSA) minimum wage requirements are changing effective Jan. 1, 2020.

Note: The Texas Comptroller of Public Accounts does not provide guidance on FLSA, overtime exemptions or related issues.

On September 27, 2019, the DOL released the final rules governing which executive, administrative and professional employees (white-collar workers) are exempt from the FLSA minimum wage and overtime pay protections. The DOL last updated these regulations in 2016; however, due to litigation, the updated 2016 regulations have not been enforced.

The final rule:

• Raises the salary threshold to $684 a week or $35,568 a year (up from $455 a week or $23,660 a year).
• Raises the total annual compensation level for “highly compensated employees (HCEs)” to $107,432 (up from $100,000).
• Allows 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.
• Does not change any of the existing job duty requirements to qualify for an exemption. Both the standard duties tests and the highly compensated employee duties test remain unchanged.

According to the DOL, in response to the overtime rule, employers can:

• Pay time-and-a-half for overtime work
• Raise workers’ salaries above the new threshold
• Limit workers’ hours to 40 per week
  –OR–
• Some combination of the above

Agencies and institutions should review information about their FLSA exempt staff and determine the effect, if any, of this change. For more information, see:

• Final Rule: Overtime Update on the DOL website
• Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees in the Federal Register