The U.S. Department of Labor has released a Notice of Proposed Rulemaking. This new rule would revise current federal overtime regulations. This notice initiates a 60 day public comment period which allows members of the business community to provide feedback regarding the proposed regulations.
As many business owners may recall, a similar overtime regulation update was initiated by the Obama Administration in 2016. However, a federal judge in Texas struck down the proposed Obama-era federal overtime rule, which would have made more than 4 million exempt employees eligible for overtime pay. As a result, the business community has cautiously anticipated the unveiling of this new 2019 overtime update.
Under this new 2019 DOL proposal, the new salary threshold for exempt-level workers would increase to $35,308 per year or $679 per week. This marks a 49% increase over the current level of $23,660 per year or $455 per week, which was established in 2004. Any employees with salaried amounts less than this threshold will be required to be paid overtime for any hours worked exceeding 40 in a work week.
The proposed 49% salary level increase may seem large to certain business owners. However, this proposed change is far less extreme than the Obama-era proposed previously blocked by the federal court in Texas. By comparison, the Obama-era change, slated to go into effect in 2016 would have doubled the minimum salary amount $47,476 annually or $913 per week.
The Trump administration and the Department of Labor (DOL) have worked to revise regulations concerning overtime in this new proposal. Their work focused on several key topics:
- Whether to vary the salary threshold on a regional basis?
- Where the salary threshold should be?
- Whether the salary threshold should be updated automatically on an annual or multi-year basis?
The resulting 2019 DOL proposal does not vary on a regional basis. It also does not include a plan to automatically update the salary threshold and it does not alter the existing “duties test” regarding exempt level workers. However, the new proposal does allow employers to include commissions and bonuses to make up 10% or less of an employee’s total salary.
Lastly, the DOL would be committed to reviewing this topic every four years. However, any future modifications to the new salary threshold amount would be required to go through the same existing update process.
How does the new DOL proposed overtime rule affect you?
If this update is finalized, employers will be required to:
- Review the salary levels of all exempt level employees
- Calculate the cost of increasing the salary to the new threshold amount
- Compare these new thresholds to the commensurate overtime expenses for hours worked in excess of 40 per week
You can review the Notice of Proposed Rulemaking and access additional resources on the Department of Labor’s website here.