Labor Department Finalizes Overtime Rule

On September 24, the Department of Labor (DOL) announced its final overtime exemption rule issued under the Fair Labor Standards Act, increasing the minimum salary threshold for workers to qualify for overtime pay when working more than 40 hours per week. By increasing the threshold for employers subject to the federal standard to $35,568, up from the current threshold of $23,660 set in 2004, the agency claims 1.3 million more American workers will be eligible for overtime pay.

The DOL’s final rule, which goes into effect on January 1, 2020, includes:

• Increasing the minimum salary required for an employee to qualify for exemption from the currently enforced level of $455 to $684 per week ($35,568 annually); 
• Increasing the total annual compensation requirement for “highly compensated employees” (HCE) from the currently enforced level of $100,000 to $107,432 per year; 
• Allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level; and 
• Revising the special salary levels for workers in U.S. territories and in the motion picture industry. 

Numerous states have, or soon might be, setting their own overtime thresholds above the newly released federal requirements. Employers based in those states, or with multistate organizations, must meet the standard in each individual state should it be higher than the federal standard.

• California’s salary threshold is tied to the minimum wage, which has been increasing annually since 2017. Beginning on January 1, 2020, the threshold will increase to $54,080 a year for businesses with at least 26 employees and $49,920 for those with 25 and under employees. 

• In New York, the minimum salary threshold differs by region. On December 31, 2019, overtime salary threshold for all employers in New York City will rise to $58,500, while the threshold for employers in Nassau, Suffolk and Westchester counties will increase to $50,700. For employers in all other New York counties, the threshold will be $46,020.

• Maine’s annual salary threshold for exempt workers is 3,000 times the state minimum wage. In 2020, that figure will increase from the current threshold of $33,000 to $36,000.  

• Several more states are considering similar proposals, including Colorado, Washington and Pennsylvania.

Visit the DOL website for more information.