New Automatic Overtime Rule: How Your Organization Could be Affected
The Department of Labor’s long-awaited Automatic Overtime Rule will be implemented on January 1, 2020. Here is an overview of what that means and how your organization may be impacted.
The Department of Labor’s new rule requires employers to pay non-hourly and exempt workers who earn $35,568 or less, overtime pay for any work performed above 40 hours per week. Prior to this new rule, the threshold salary for automatic eligibility for overtime pay above a normal 40-hour week only included employees who earned less than $23,600 a year.
The new rule will provide overtime pay eligibility to an estimated 1.3 million workers who earn between $23,000 and $35,568. The impact varies significantly by industry (food service and hospitality having a large population of their employees that will be newly eligible); however, it can be a hurdle for ANY organization that does not take action to plan for this change.
You may remember hearing about this a few years ago. In 2016, during the Obama Administration, the Department of Labor proposed a salary threshold of $47,476, adjusted every three years for inflation (the new rule does NOT adjust for inflation), which would have been implemented in December of 2016. But soon before the rule went into effect, a federal judge ruled that the DOL overreached its authority by changing overtime eligibility based on a salary test without changing the duties test. This ruling facilitated the mold of the finalized rule that we will see in January 2020.
Again, the new rule does not adjust for inflation and allows incentive payments and non-discretionary bonuses (including sales commissions) to be used to meet up to 10% of the salary threshold.
Far fewer employees will be impacted by the overtime rule coming up than would have been under the 2016 proposal. However, there are some considerations companies should make when assessing how the updated overtime salary will impact their workforce. After determining how many employees are impacted by the salary threshold ($35,568), the organization should talk with their C-suite, and their advisors to determine which strategy fits their needs best.
The new rule also provides certain exemptions based on job duties. So, as we start to wrap up the year and review our successes and what we need to improve, I urge you to take inventory on this and have a plan in place before the onset of 2020.
If this has piqued your interest (or concerns) at all, please feel free to reach out to me or someone from The ‘A’-Team with any questions or guidance.
- DOL Final Rule: White Collar Overtime Regulations
- 5 Ways to Address Wage and Hour in Your Employee Handbook
- Safety E-Book
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