DEPARTMENT OF LABOR ANNOUNCES
NEW OVERTIME REGULATIONS
THE NEW RULE: On March 7, 2019 the U.S. Department of Labor issued a replacement of the controversial Obama-era overtime rule. The new rule raises the minimum salary threshold required for non-exempt workers to qualify for the Fair Labor Standards Act’s “white collar” exemptions from $23,660 to $35,308 per year. The former rule, blocked by a Texas federal judge in 2017 just days before it was scheduled to take effect, was never put into place. It would have raised the minimum salary to $47,476. Above the $35,308 compensation level, employees are not automatically eligibility for overtime, however, and still must meet various job duties to qualify.
The new rule increases the total annual compensation requirement for highly compensated workers from $100,000 to $147,414. The former rule would have raised the threshold to $134,004. The Department of Labor also proposed regular increases to that threshold every four years, but only after the submission of public comments. The former rule would have altered the thresholds without public comment.
The new rule also allows employers to include certain non-discretionary bonuses and incentive payments up to 10% of the new $35,308 ($679/wk) threshold.
The Department of Labor estimates the new rule will make more than a million workers newly eligible for overtime, compared to the former rule which would have affected an estimated four million workers.
The Department of Labor declined to make any changes to the so-called “duties test” (for executive, administrative, professional, computer professionals and outside salespersons) which is another way the FLSA rules operate to identify and classify employees that are exempt from the overtime rules.
The rule is expected to take effect in January 2020.
WHAT THIS MEANS FOR OUR EMPLOYER CLIENTS:
We encourage all of our clients to immediately determine if there are any employees who are currently exempt (ineligible for overtime):
- making between $23,660 and $35,308 (minimum salary threshold)
- making between $100,000 and $147,414 (highly compensated)
If there are employees in either category, they will need to be converted to non-exempt hourly employees eligible for overtime effective no later than December 31, 2019, or their salary will need to increase to exceed the new thresholds. Please let us know if you need to discuss either option before the effective date.
State law may differ from these federal regulations. For example, the Pennsylvania Minimum Wage Act does not recognize the highly compensated test. A review of state law is required before any permanent changes can be made.
To continue the discussion, feel free to contact Mike Torchia, Michael Dubin, Steve Goldblum or Frank Spada at 215-887-0200.