Department of Labor Finalizes New Overtime Rule

On September 24, 2019 the United States Department of Labor issued a final overtime rule regarding salaried employees. This rule has been anticipated and is considered long overdue since the last increase took place more than 15 years ago. The Obama administration attempted to nearly double the salary threshold in 2016 before a federal judge ruled that the increase was essentially too high.

Since the planned increase was stopped, the Department of Labor has been hard at work to come up with another, more reasonable, overtime rule change. After much speculation, they settled on the amount of $35,568 annually ($684.00 weekly), an increase of more than $10,000 from the previous $23,660 annual amount ($455 weekly). This change is expected to cause both large and small employers to either adjust salaries or reclassify employees from salaried exempt to hourly non-exempt.

This rule will go into effect on January 1, 2020, which allows employers time to analyze their salaried employees’ pay rates and make adjustments, if needed. Here are the key components of the new overtime rule that employers need to know:

  • There will be no changes to the duties test used to classify employees as exempt or non-exempt from overtime. If employees previously qualified as exempt, they will continue to qualify if their salary is a minimum of $35,568 annually. If their salary is below $35,568 annually, they will be considered non-exempt and would need to be compensated for overtime.
  • Nondiscretionary or incentive payments (commissions) can be used to satisfy up to 10% of the standard salary level.

Many anticipated the Department of Labor to include automatic adjustments to the overtime rule to avoid another extended time lapse between changes. This, however, was not included and it is unknown when the next adjustment will take place.