The US Department of Labor issued a final ruling today on the new salary threshold for overtime exemption: $684 per week (equivalent to $35,568 per year for a full-year worker). Anyone who earns less than this becomes eligible for overtime pay, regardless of actual duties, beginning January 1, 2020.

This increase in the minimum salary for exemption has been in discussions since the Obama administration proposed an increase to $47,476 in 2016. That was struck down by a court ruling, and the Trump administration chose not to appeal. Of course, it is possible that this will be struck down as well, but the reason for the 2016 ruling was, as employment lawyer Jon Hyman explained, the "new, higher salary level improperly swallows the rest of the exemption test and makes salary alone dispositive on the issue of exemption qualification."

This increase is unlikely to face the same objections, as it's substantially lower and the formula used was the same one used to calculate the 2004 threshold--the last time it was changed.

Who Will Be Affected?

The Department of Labor estimates that 1.2 million people will become eligible for overtime pay under this new rule. However, if a state has a higher threshold (like California) this ruling doesn't affect them. The federal law is the minimum, and states are free to have higher levels.

The people most likely to be affected are retail and restaurant managers who qualify for exemption under the duties test, but have low salaries. Additionally, people who work for non-profits or political campaigns (which have traditionally low salaries) may find themselves overtime-eligible. Another group would be part-time professional employees. There isn't an exception for people who are working part-time.

Is This Good News or Bad News?

It really depends on how your company implements the rule change. They can simply take your current salary, do the math to get an hourly rate for 40 hours a week, and make that your hourly wage. If you work more than 40 hours in a week you'll get overtime pay. However, if you're regularly working more than 40 hours a week, your employer may adjust your hourly wage so that your hourly wage plus overtime roughly equals your current salary.

Some employees will feel a loss of autonomy, as they will have to track their hours, punch a time clock, and may lose some freedom in activities like working from home, if their management doesn't trust unsupervised hourly work. 

But, overall, it's been a long time since we've had a bump in the threshold. And since this is based on the existing formula, I doubt we'll see the lawsuits and complaining that happened in 2016.

What to Do if You Are Affected

As your boss or HR department how your company will implement this new ruling. If your company does year-end salary increases, it's important to work these new pay requirements into the year-end increases.

And please remember, this doesn't say anything about your abilities or values. You're still the same person doing the same job. It's an administrative change--hopefully a positive one. 

Published on: Sep 24, 2019
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