Some employers in Texas are now faced with the prospect of paying more overtime. On January 1, 2020, the U.S. Department of Labor’s new salary threshold in determining which employee’s are subject to overtime pay became effective.
The final rule updates the earnings thresholds necessary to exempt executive, administrative and professional employees from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements, and allows employers to count a portion of certain bonuses/commissions towards meeting the salary level. The new thresholds account for growth in employee earnings since the thresholds were last updated in 2004.
The changes include:
- raising the “standard salary level” from the currently enforced level of $455 per week to $684 per week (equivalent to $35,568 per year for a full-year worker);
- raising the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year;
- allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices; and
- revising the special salary levels for workers in U.S. territories and the motion picture industry.
The salary test is an initial threshold to determine if a worker is exempt from overtime. Even if the worker meets the other criteria for an exemption, they are owed overtime if they do not meet the salary requirements. As a result, a restaurant manager making $35,000 per year would be eligible for overtime for every hour over 40 in a work week.
As always, the examination of whether an employee meets the criteria for an exemption is a fact-intensive inquiry. If you would like Mark Smith Law, PLLC to review your exemption classifications, please contact us here.