The U.S. Department of Labor (DOL) released a long-anticipated final ruling on September 24, 2019, which revises federal overtime regulations. Changes will be effective January 1, 2020, resulting in the eligibility of overtime pay for approximately 1.3 million workers.
As many business owners may recall, a similar overtime regulation update was initiated by the Obama Administration in 2016. However, a federal judge in Texas struck down the proposed Obama-era federal overtime rule, which would have made more than 4 million exempt employees eligible for overtime pay. As a result, the business community has cautiously anticipated this new 2019 overtime ruling.
Under this new 2019 DOL ruling, the standard salary threshold for exempt-level workers would increase to $35,568 per year or $684 per week. In comparison, the prior threshold was $23,660 per year and $455 per week.
The salary level increase may seem large to certain business owners. However, this change is far less extreme than the Obama-era proposed previously blocked by the federal court in Texas. By comparison, the Obama era change, slated to go into effect in 2016 would have doubled the minimum salary amount $47,476 annually or $913 per week. The total annual compensation level for highly compensated employees of $100,000 has been raised to $107,432 per year.
The Trump administration and the DOL have worked to revise regulations concerning overtime in this new proposal. Their work focused on several key topics:
- Whether to vary the salary threshold on a regional basis?
- Where the salary threshold should be?
- Whether the salary threshold should be updated automatically on an annual or multi-year basis?
The resulting 2019 DOL ruling does not vary on a regional basis. It also does not include a plan to automatically update the salary threshold and it does not alter the existing “duties test” regarding exempt level workers. However, the new ruling does allow employers to include commissions and bonuses to make up 10% or less of an employee’s total salary.
Lastly, the DOL is committed to reviewing this topic more frequently. However, any future modifications to the new salary threshold amount would be required to go through the same existing update process.
How the new ruling affects your business
Employers will be required to:
- Review the salary levels of all exempt level employees
- Calculate the cost of increasing the salary to the new threshold amount
- Compare these new thresholds to the commensurate overtime expenses for hours worked in excess of 40 per week
If you have questions about how this new rule may affect your business or organization, please complete the form below.