The wait is over. The U.S. Department of Labor (DOL) has revealed its final rule extending overtime pay to an estimated 1.3 million workers under the Fair Labor Standards Act.
The rule is still a far cry from the Obama administration’s proposed overtime overhaul, which would have impacted around 4.2 million workers, raised the salary threshold for overtime pay to $913 per week ($47,476 annually), and updated every three years to keep up with the cost of living. That rule, however, was blocked by a federal judge in 2016.
The new rule, announced on September 25, 2019, raises the salary threshold to $684 per week ($35,568 annually) from the current $455 per week ($23,660 annually). This means employers must pay overtime to all employees making less than the salary threshold, if they work more than 40 hours per week. Unlike the Obama administration’s proposal, the new rule does not provide for automatic updates to the salary threshold to keep up with the cost of living.
The rule also raises the salary cutoff for the highly compensated exemption to $107,432 from the current $100,000. This is much lower than the DOL’s proposal of $147,000 announced last March.
Employees that make more than $35,568 per year but less than $107,432 yearly still may qualify for overtime if their job duties do not qualify for an exemption. The job duties test for the white collar exemptions (executive, professional, and administrative employees paid on a salary basis) remains unchanged.
Employers have only three months to prepare for the final rule’s effective date of January 1, 2020. To gear up for compliance, employers may want to increase salaries, create bonus or incentive pay programs to satisfy up to 10% of the $35,568 minimum, or reclassify positions as non-exempt and consider a wage adjustment. As always, our labor and employment attorneys are available to help with this transition.