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DOL Issues Long-awaited Final Rule on White Collar Overtime Exemption

Sharlene Jooste

The long running saga of changes to the salary threshold for white collar exemptions from overtime entitlement seems to be reaching a conclusion. The US Departmentof Labor announced its final rule on September 24 and it will be effective from January 1, 2020. From that date, as well as having to satisfy the “applicable duties” test, a white-collar employee needs to earn at least $684 per week (equivalent to $35,568 annually) to be exempt. This is a significant increase from the current threshold of $455 per week ($23,660 annually), but some way from the $913 that was proposed in 2016 under the previous Administration. Employers are able to use non-discretionary bonuses, incentives and commissions to meet up to 10% of the new standard salary level, provided that such payments are made at least annually. Further, to qualify under the Highly Compensated Employee exemption, employees must earn $107,432 annually (as well as meeting the duties test), compared to the current level of $100,000.

The Department of Labor has estimated that around 1.3M workers currently classified as exempt under the executive, administrative, professional, computer or outside sales exemptions will become eligible for overtime after January 1 (and that a further 100,000 employees will no longer qualify under the Highly Compensated Employee exemption). There is relatively little time for employers to prepare to comply with the new rule and there is a clear risk of employees being misclassified as exempt beyond the start of 2020, with the consequent risk of litigation for non-compliance and non-payment of overtime wages.   

About the author:

Sharlene started her actuarial career in 2008 after obtaining a degree in financial and actuarial mathematics from the University of Pretoria. Prior to joining Beazley, Sharlene worked in both life and non-life actuarial positions. In May 2012 Sharlene joined the Specialty Lines actuarial team as a pricing actuary. In January 2015 Sharlene transferred to the Management Liability team as an EPL underwriter.

Sharlene Jooste
Sharlene Jooste

Actuary & Underwriter - US Executive Risk