Posted on Monday, March 11th, 2019.
On March 7, 2019, the U.S. Department of Labor released a proposed rule affecting exemption from overtime pay. Generally, bona fide executive, administrative and professional employees are exempt from overtime pay even if they work than forty hours per week. Under current law, such employees must earn at least $455.00 per week ($23,660.00 annually) to be eligible for exemption. Employees making less than this weekly salary cannot be exempt from overtime pay regardless of their job duties. The proposed rule would increase this minimum salary level to $679.00 per week ($35,308.00 annually).
In addition, so-called “highly compensated employees” earning at least $100,000.00 per year are exempt from overtime pay based on a less onerous job duties test. Under the proposed rule, the threshold for qualification as a “highly compensated employee” will increase to $147,414.00 per year.
The proposed increase in the salary threshold for overtime eligibility is significantly less than the Obama Administration’s attempt to raise the salary threshold to $47,476.00 annually. The Obama Administration’s rule was enjoined by a federal judge in 2016, leaving the existing $455.00 per week ($23,660.00 per year) standard in place. But even the lower increase now proposed would expand overtime eligibility to more than one million additional workers, according to Department of Labor estimates.
Unlike the Obama Administration rule, the current proposal contains no automatic adjustment to the salary threshold level going forward. Future increases in the salary threshold would require further rule making.
The proposed rule will not take effect until the expiration of the notice-and-comment period, and until the Department of Labor reviews the public comments on the proposed rule and announces it as a final rule. The notice-and-comment period lasts for 60 days following the publication of the proposed rule in the Federal Register.
Now is a good time to review your company’s payroll to determine how many of your employees would be affected if the proposed rule takes effect.