Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
On September 24, 2019, the Wage and Hour Division of the U.S. Department of Labor (DOL) announced its final rule concerning changes to the Fair Labor Standards Act (FLSA) “white collar” overtime exemptions. This final rule, which will take effect on January 1, 2020, (a) increases from $455 to $684 per week ($35,568 per year) the minimum standard salary level for overtime exemption; (b) raises from $100,000 to $107,432 per year the total annual compensation requirement for “highly compensated employees” (HCE); and (c) permits employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10% of the minimum salary level as long as such payments are made at least annually.1
With respect to the new minimum salary requirement, the DOL expressly stated that this level will not apply to employees in Puerto Rico. In 2016, Congress enacted the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), which established an Oversight Board to address Puerto Rico’s debt crisis. Section 404 of PROMESA provided that the FLSA’s white collar overtime regulations issued 2016 (but later invalidated) “shall have no force or effect in the Commonwealth of Puerto Rico” until the Comptroller General of the United States conducted an assessment and issued a report to examine the impact of the regulations’ application on the Island’s economy.2 We had previously discussed PROMESA’s impact on the 2016 rule and noted that it remained to be seen whether the rule would apply to Puerto Rico once it took effect.3
In the new final overtime rule, the DOL explained that while Section 404 does not expressly apply to the 2019 rule because the language specifically referenced the 2016 version, “Section 404 . . . reflected Congress’s apprehension with increasing the salary level in Puerto Rico, and given the current economic climate there, the Department proposed to set a special salary level in Puerto Rico of $455 per week—the level that currently applies under PROMESA.”4
It is therefore clear that the new minimum salary requirement for overtime exemption will not apply to Puerto Rico employees. As of January 1, 2020, the minimum salary requirement in Puerto Rico will remain at $455 per week, which is the special salary level the DOL set for Puerto Rico in the final rule.
It is also understood that the use of nondiscretionary bonuses and incentive payments will apply to Puerto Rico as the DOL’s rule states that it will apply to special salary levels, as the one set for Puerto Rico.5
Finally, the final rule is silent regarding the salary increase for HCE as applied to employees in Puerto Rico. Therefore, that portion of the final rule can be reasonably interpreted as applying to employees in Puerto Rico.
1 Dept. of Labor, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, 84 Fed. Reg. 51230-51308 (Sept. 27, 2019).
2 84 Fed. Reg. at 51246. Section 404 states that “any final regulations issued related to” the DOL’s 2016 attempt to revise the white collar overtime regulations, “shall have no force or effect” in Puerto Rico until the Comptroller General of the Unites States completes and transmits a report to Congress assessing the impact of applying the final regulations to Puerto Rico, and the Secretary of Labor, “taking into account the assessment and report of the Comptroller General, provides a written determination to Congress that applying such rule to Puerto Rico would not have a negative impact on the economy of Puerto Rico.”
3 See Ana Beatriz Rivera-Beltrán and Mariela Rexach-Rexach, Application of New DOL Overtime Rule to Puerto Rico, Littler ASAP (May 16, 2016).
4 84 Fed. Reg. at 51246.
5 84 Fed. Reg. at 51233.