New Overtime Rules on January 1, 2020 Posted by Association of Vermont Credit Unions on 2:58 PM

Starting January 1, 2020 credit unions will have a new salary threshold to determine employees who are exempt from overtime pay.  Beginning with the new year, the threshold under the Fair Labor Standards Act (FLSA) increases to $648 per week, or $35,568 annually.

In 2016, the Department of Labor proposed updating the salary threshold for exempt employees under the executive, administrative, or professional exemption from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). This meant that, in addition to meeting the duties test for one of the three exemptions, an employee would need to be paid at least $47,476 per year in order to be considered exempt from the overtime requirements of the FLSA. Additionally, the 2016 rules raised the threshold for the "Highly Compensated Employee" exemption from $100,000 to $134,004.

The 2016 rules were blocked by a federal District Court and never went into effect.

The new rules for 2020 raise the salary threshold for the executive, administrative, and professional exemptions, but don't go as far as the 2016 rules. Starting on January 1, 2020 the salary threshold for the executive, administrative, and professional exemptions will rise from $455 per week ($23,660 annually) to $684 per week ($35,568 annually). This threshold will also apply to employees who fall under the computer employee exemption. Additionally, the "Highly Compensated Employee" exemption threshold will rise from $100,000 to $107,432 annually.

The Department of Labor will allow employers to use non-discretionary bonuses and incentive payments, including commissions, to satisfy up to 10% of the salary threshold for the executive, administrative, and professional exemptions. Discretionary bonuses cannot be used toward meeting the salary threshold. The Department of Labor will allow employers to make catch-up payments to employees who do not earn enough in non-discretionary bonuses or incentive payments in a given 52-week period to retain exempt status, provided that the catch-up payment is made within one pay period of the end of the year.

The duties tests, which require that employees meet certain duties requirements in order to be exempt from overtime, have not changed. The duties tests will remain the primary method for determining whether an employee is exempt, subject to the higher salary thresholds.

There will also be no automatic updates to the salary threshold, as was the case in the proposed 2016 rules. The Department of Labor has committed to updating the salary thresholds more often, but has declined to implement a system where the salary thresholds will update automatically based upon a formula.