Approximately 1.3 million salaried American workers will now receive overtime pay for any extra hours they work. On September 24, 2019, the U.S. Department of Labor (DOL) issued a final rule change that raises the salary threshold for overtime pay eligibility under the Fair Labor Standards Act, the first time it has adjusted this cap since 2004.
Salary Cap Raised From $23,660 per Year to $35,568 per Year
FLSA, the federal employment law that imposes minimum wage, overtime pay, and other requirements on almost all American employers, provides that all “non-exempt” employees must receive one and a half times their regular wage for all hours worked over 40 in any given workweek.
Because of the nature of their job responsibilities – and the size of their paychecks – many if not most salaried employees are exempt from FLSA’s overtime pay requirements. But many workers with salaries on the lower end of the scale must receive overtime pay. Currently, employers must pay overtime rates to all salaried workers whose primary job responsibilities involve “executive, administrative or professional” duties and whose salaries are lower than $23,660 per year – or $455 per week.
Under the new rule, which becomes effective on January 1, 2020, a worker can earn a salary of up to $35,568 per year – or $679 per week – and still be entitled to overtime pay.
While this raised threshold significantly expands the pool of employees who will now receive overtime pay, it is also substantially lower than the $47,000 cap proposed during the Obama administration, which would have made four million American workers eligible for overtime pay. A federal court invalidated that proposed rule in 2017.
The new rule also makes it easier for employers to use bonuses and commissions as a way to keep employees above the salary threshold and thus avoid any obligation to pay overtime rates. Specifically, employers can “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, in recognition of evolving pay practices.”
If you are impacted by the overtime exemption rules, either currently or when the new final rule comes into effect next year, speaking with an experienced employment attorney is the best way to understand your rights.