An estimated 1.3 million more American workers soon will be eligible for overtime compensation with an expansion of the Fair Labor Standards Act.
The U.S. Department of Labor on Sept. 24 issued its final overtime rule, increasing the threshold at which non-exempt employees can receive overtime pay to $35,568, or $684 per week.
The higher threshold will go into effect on Jan. 1, 2020.
“This rule brings a commonsense approach that offers consistency and certainty for employers as well as clarity and prosperity for American workers,” said Patrick Pizzella, acting U.S. Secretary of Labor, in a statement issued by the Labor Department.
Employers will be allowed to count a portion of certain bonuses and commissions toward the new salary level – up to 10 percent — once the change takes effect.
This will mark the first major change in the overtime threshold since 2004.
The Labor Department announced the proposed change in March.
To comply, employers will have several options:
- Increase employee salaries to meet the new threshold.
- Modify job duties to meet overtime exemption standards.
- Reclassify exempt employees as nonexempt and pay overtime wages.
Under the Fair Labor Standards Act as it is now, salaried employees who are in executive, administrative and professional roles generally are exempt from being able to earn overtime pay if they make more than $455 per week or $23,660 a year.
The Department of Labor relied on extensive public input before making a recommendation for a revised salary threshold. That process included six in-person listening sessions around the country and receiving more than 200,000 comments.
This will be only the second change to the overtime salary threshold since 1975. The Labor Department isn’t expected to increase the threshold annually but is committed to raising it more frequently based on economic conditions.
The existing threshold was nearly doubled in 2016 before a Texas federal judge ruled the labor department overstepped its authority with the drastic threshold increase.
The ruling, which would have gone into effect in December 2016, halted a plan to require employers to pay overtime for salaried workers unless they made more than $913 per week or $47,476 a year.
~Josh Heck, Marketing Manager, Syndeo