Overtime Pay Update: 1.3 Million More Americans Included

OvertimeAccording to the US Department of Labor, you could qualify for overtime pay if you earn less than $684 per week when its updated overtime exemption rule goes into effect on January 1, 2020.  This past September, the DOL introduced the final earnings threshold for the FLSA’s administrative, executive, and professional employee overtime exemptions. These employee classifications encompass white-collar workers who receive a lucrative yearly salary rather than an hourly wage and exercise independent decision-making in their position.  The new rule accounts for increases in employee earnings since they were last updated in 2004. The DOL projects that its new rule will entitle 1.3 million more Americans to overtime pay. 

The Department of Labor’s Final Overtime Rule 

The Fair Labor Standards Act states that employees are entitled to minimum wage pay (at least the federal minimum of $7.25) and overtime pay (time and one-half compensation for every hour worked beyond forty hours in a week).  However, some employees are exempt from overtime compensation based on a salary and duties test.  The duties that qualify an employee for exemption are divided into three categories: executive, administrative, and professional.  Highly compensated employees that earn above a certain threshold are also immediately overtime-exempt if they fulfill at least one of the responsibilities of an executive, administrative, or professional worker. The January 2020 final rule amends the salary and duties tests for discerning overtime exemption in several ways.

  1. Employees are now only exempt from overtime compensation if they are paid more than $684 a week or $35,568 annually.  Previously, the salary threshold for exemption was $455 per week or $23,600 per year.  
  2. Workers are considered “highly compensated” and overtime-exempt if they earn more than $107,432.  The previous salary threshold was $100,000, but it was adjusted to equal the salary of the 80th percentile of full-time salaried employees. 
  3. Employers can now count 10% of annual bonuses, incentive payments, and commissions towards the salary threshold for overtime exemption. 
  4. The DOL also maintains several “special salary levels” for specific regions and industries.  The exemption salary threshold will be $380 per week in America Samoa because its minimum wage is below that of the federal minimum wage.  The exemption salary will be $455 per week in Puerto Rico, the U.S. Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands.  Finally, employees in the motion picture producing industry have a special threshold salary of $1,043 per week.  

The DOL promised to revise the exemption provisions more frequently at the end of its September 2019 update because “fixed earning thresholds become substantially less effective over time.”  In light of the DOL’s changes, employers will have to decide whether to classify their employees as nonexempt or to raise their salaries to the new exemption level. 

Seek Legal Assistance 

If you have been improperly classified as an overtime-exempt or nonexempt employee, contact the Law Office of Christopher Q. Davis, located in New York City, can assist you. Contact us today at (646) 430-7930 to schedule a free case evaluation and receive experienced legal counsel.