On September 24, the US Department of Labor (DOL) announced its final rule, which will update minimum salary thresholds and expand the number of employees who are eligible for overtime nationwide.
This is the first time that overtime regulations have been updated since 2004, and the rule has been in discourse since the Obama administration proposed a change in 2016. The new rule overturns Obama’s proposal to increase exemptions to $913 per week and considers both evolving pay practices and public comments.
Under the new rule, the DOL is:
- Raising the “standard salary level” from $455 to $684 per week, or from $23,000 a year to $35,568 per year for full-time workers
- Raising the salary level for “highly compensated employees (HCE)” from $100,000 to $107,432 per year
- Allowing bonuses, incentive payments, and commissions to satisfy up to 10% of salary requirements, as long as they are paid at least annually
- Revising special salary levels for workers in U.S. territories and the motion picture industry
The DOL has also committed to updating the rule every 4 years.
This year, the rule will go into effect on Jan. 1, 2020 and is expected to remove about 1.2 million employees from overtime exemptions.
Employers should start preparing for compliance immediately. A good first step is to examine payroll and salary records and determine which employees will now be eligible for overtime. From there, employers can implement a raise to keep their workers exempt, or plan to start paying overtime in 2020 to ensure that all employees meet the new minimum salary thresholds.
Changing the way your business runs can be difficult, and disputes are certain to arise in 2020. To avoid disagreements and protect your business from noncompliance and litigation, let our board-certified attorney at Patterson, P.C. walk you through the changes.