New Overtime Rule: What You Need to Know

Starting January 1, 2020, the Trump Administration’s Final Rule extends overtime pay eligibility to an estimated 1.3 million employees.

The new Final Rule increases the annual salary threshold below which executive, administrative and professional workers qualify for overtime wages to $684.00 per week ($35,568 annually) from the current weekly salary level of $455.00 per week (approximately $23,600 annually). Employers must pay time and a half to salaried workers making less than these threshold amounts for all hours worked over  forty (40) hours per work week.

The Obama Administration had issued an order which set the salary threshold to $47,500 and automatically updated it every three (3) years to keep pace with the cost of living. That rule was blocked by a federal judge in Texas in 2016 and rescinded by the Trump Administration.

The Final Rule also raises the salary cutoff for “highly compensated employees” to be exempt from receiving overtime pay from $100,000 per year to $107,432 per year. This too marks a significant decline from the proposed rules boost for “highly compensated” employees to $247,000 annually, which was not an amount that was well supported in the business community. “Highly compensated employees” are exempt from overtime pay provided they satisfy a minimal duties test.

Employers can also satisfy up to 10% of the $35,568 minimum annual salary threshold via bonuses and commissions that are paid at least annually. The Department of Labor did not revise the separate duties test, which exempts workers from overtime if their primary duties qualify as managerial, professional, or administrative. The Department also did not provide for cost of living increases for the minimum salary thresholds as the Obama Administration had done.

For more information regarding the new rule or any other employment-related matter, reach out to the experienced attorneys on Fraser Stryker’s Labor and Employment Law team.