New US Overtime Rule Pushes Pay Threshold to $35,568

The US Department of Labor announced today new overtime pay rules that will make 1.3 million more workers eligible for time and a half.

Beginning Jan. 1, 2020, all employees paid less than $35,568 annually must be paid one and a half times their regular hourly rate for time worked beyond 40 hours in a workweek.

The DOL also increased the threshold for “highly compensated” individuals to $107,432 annually. Nondiscretionary bonuses and incentives (such as commissions) can be used to cover up to 10% of the annual minimum, so long as they are paid annually.

No changes were made to the job duties tests, which come into play only in determining if individuals earning more than the minimum are to be considered exempt under the Fair Labor and Standards Act. These employees must meet at least one of the following tests to be exempt:

A manager of others with the authority or significant recommending responsibility to fire, hire or change their status.
The employee must be a white collar worker exercising discretion and judgment in the performance of their duties.
A professional whose primary work requires the use of advanced knowledge acquired through study in a specialized field.

The changes are the first since 2004 and revise downward pay thresholds proposed by the DOL during the Obama Administration. In 2016, the DOL set the minimum pay for exempt workers at $913 a week, double the current $455 minimum. The changes were put on hold when business groups and 21 states challenged the rule. In August 2017 a federal court in Texas struck down the rule. By then, a new administration was in the White House and it decided not to appeal, but to reconsider the matter.

In March of this year, the DOL proposed its new compensation formula opening a public comment period that yielded some 116,000, of which tens of thousands were duplicates or templated comments, the DOL said. Campaigns calling for higher thresholds had been conducted by labor unions and other worker focused advocacy groups.

Now that the FLSA rules are final, employers need to review their exempt and hourly workers to decide a course of action. As in 2016, attorneys and labor consultants say it may make more economic sense to bring currently exempt employees up to the new salary thresholds rather than pay overtime. It’s also important to consider how to respond to workers who are now exempt but may feel they are being demoted when told they have to begin filling out time cards. For more information on what you need to do, see “You Need to Prepare Now For the New OT Rules.”