DOL Proposes New Overtime Threshold
On March 7, 2019, the U.S. Department of Labor (DOL) proposed a new overtime rule that would increase the minimum salary that white-collar employees must be paid to qualify as exempt under the Fair Labor Standards Act (FLSA) from $455 to $679 per week (or $23,660 per year to $35,308 per year). If passed, this rule would take effect Jan. 1, 2020, and increase the number of American workers who are eligible for overtime pay by more than a million.
The new rule only changes the minimum salary requirement. In order to receive overtime pay, workers still must work more than 40 hours in a work week and perform what the DOL has defined as “exempt” duties for executive, administrative, professional computer and outside sales employees. The overtime rate will remain at time and a half of the regular hourly wage.
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The white-collar rule includes exemptions from the FLSA’s minimum wage and overtime pay requirements for executive, administrative, professional and certain other employees. The last time the overtime threshold was last raised in 2004. (In 2016, a final rule that would increase the salary level by more than double was invalidated by a court order).
This proposed rule would also:
- Allow employers to use nondiscretionary bonuses and incentive payment, including commissions that are paid annually or more frequently to meet 10 percent of the standard salary level.
- Increase the salary requirement for highly compensated employees (HCE) from $100,000 to $147,000 per year.
There are no changes to the job duties test nor any plans to automatically adjust the salary threshold in the proposed rule. Although, the DOL does recognize the need to adjust the salary level more often.
The proposed overtime rule was submitted for publication in the Federal Register. Once published, the public will be given a chance to comment on the rule. More information and a link to the current version of the proposed overtime pay rule, is available on the DOL website.
Employers should be prepared to raise salaries to meet the minimum thresholds, pay overtime when appropriate and adhere to the new rules if they go into effect. Employers with salaried employees who currently make less than $35,308 per year should monitor the development of this rule and be prepared to adjust their pay practices. If needed, it is wise to seek legal counsel to discuss options and strategies for implementing future change.
Feel free to reach out to us if you have any questions about this new rule. We will keep you updated on the progress.
By: Dee Gray, CPP (New Philadelphia)