As we have previously reported, for the past three years the annual salary threshold below which workers qualify for overtime wages has been subject to regulatory changes and legal challenges. In May 2016 the Department of Labor (DOL) issued new rules that raised the approximately $23,600 current salary threshold to $47,500. However, before it took effect, a federal court blocked the new rule and the DOL went back to the drawing board.
On March 7, 2019, the DOL issued a proposed new rule that would increase the salary threshold to $35,568. Today, the proposed rule has been finalized and, effective January 1, 2020, the new salary threshold that must be met by salary exempt employees will be $35,568. Beginning January 1, 2020, any worker making less than this new threshold will be entitled to overtime for all hours worked beyond a 40-hour workweek. In addition, unlike the 2016 rule, the new regulations do not include an automatic update to the newly announced salary threshold.
In addition to the change in the salary threshold, the new rule also raises the total annual compensation level for “highly compensated employees” from the current level of $100,000 to $107,432 per year. Moreover, the new rule allows 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.
The change in the salary threshold is expected to engender legal challenges from worker advocate groups who have urged the DOL to retain the 2016 salary threshold as well as the automatic updates. We will continue to keep you updated as the events unfold between now and the end of the year. However, all employers must keep in mind this new rule in hiring and/or promoting employees into salary positions as well as deciding upon raises relating to salaried employees.
Please contact any of the employment and labor attorneys at RBS with any questions relating to the new overtime rule and any other wage and hour compliance issue.