Reminder: Overtime Rule Goes into Effect on January 1

December 13, 2019

Final Rule Issued on Calculating ‘Regular Rate’ of Pay

PMAA would like to remind everyone that the new overtime rule goes into effect on January 1. Earlier this year, the Department of Labor (DOL) issued its long-awaited final rulemaking on employee overtime pay. The final rule updates earnings thresholds that must be reached to exempt executive, administrative or professional employees from the Fair Labor Standards Act’s minimum wage and overtime pay requirements.

The new DOL rule raises the annual earnings threshold that triggers overtime pay (time and a half) for an employee working beyond 40 hours per week from $23,660 to $35,568. The annual earnings threshold increase will expand overtime pay eligibility to 1.3 million workers for the first time. The new, higher threshold accounts for growth in employee earnings since the currently enforced thresholds were set in 2004. Moreover, the final rule does not adjust the annual earnings threshold to inflation. Instead, any increase would require a new DOL rulemaking based on a determination of economic need.

The final rule replaces an Obama Administration rulemaking that raised the annual earnings threshold for overtime eligibility to $47,476. The Obama rule would have expanded overtime eligibility to 4.2 million workers. However, a federal court enjoined the rule from going into effect. The new overtime rule was written in response to the federal court action.

The final rule would also:

  • allow employers to count a portion of certain bonuses and commissions towards meeting the annual salary level;
  • raise the “standard salary level” from $455 to $684 per week (equivalent to $35,568 per year for a full-year worker);
  • raise the total annual compensation level for “highly compensated employees” from $100,000 to $107,432 per year; and
  • allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level.

Meanwhile, the Small Business Legislative Council (SBLC) recently held a webinar regarding the new final overtime regulations. The webinar provided an overview of the DOL’s newly released overtime rules and recommendations for businesses on what steps they need to take before the rules go into effect on January 1. PMAA is a board member of the SBLC. Click here to view the webinar.

Additionally, this week, DOL issued a final rule that it says will allow employers to more easily offer benefits and perks to their employees. The ‘regular rate’ rule is used to calculate overtime premiums under the Fair Labor Standards Act (FLSA). The SBLC will have more information on the final rule soon and PMAA will report on the specifics.