There was a lot more than football to keep an eye on January 1. Take, for example, the new overtime pay regulations from the U.S. Department of Labor (DOL) that went into effect New Year’s Day.

The department estimates that 1.2 million additional workers will be entitled to minimum wage and overtime pay as a result of the increase to the standard salary level. The DOL also estimates that another 101,800 workers will be entitled to overtime pay as a result of the rise to the highly compensated employee (HCE) compensation level.

 

How We Got Here

The U.S. District Court for the Eastern District of Texas enjoined a 2016 Obama administration “final rule” to change the overtime thresholds on November 22, 2016, then later rule the rule invalid. As of November 6, 2017, the U.S. Court of Appeals for the Fifth Circuit has held the appeal in abeyance pending further rulemaking regarding a revised salary threshold. As the 2016 final rule was invalidated, the Department has consistently enforced the 2004 level throughout the last 15 years.

This “final rule” updates earnings threshold exemptions for executive, administrative, or professional employees from the FLSA’s minimum wage and overtime pay requirements. It allows employers to count a portion of specific bonuses (and commissions) towards meeting the salary level. The new thresholds account for growth in employee earnings since the currently enforced 2004 limits.

 

In the final rule, DOL is:

  • Raising the “standard salary level” from the currently enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker);
  • Raising the total annual compensation level for “highly compensated employees (HCE)” from the currently enforced level of $100,000 to $107,432 per year;
  • Allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that paid at least annually to satisfy up to 10 percent of the standard salary level, in recognition of evolving pay practices; and
  • Revising the individual salary levels for workers in U.S. Territories and the motion picture industry.

 

Oddly enough, with all the kerfluffle in Washington these days, there was nearly universal agreement to increase salary thresholds given wage and salary growth since 2004.

According to DOL spokespeople: “Nearly every person who commented on the Department’s 2017 Request for Information, participated at listening sessions in 2018 regarding the regulations, or spoke on the Notice of Proposed Rulemaking agreed that the thresholds needed updating for this reason.”

More information about the final rule is available at https://www.dol.gov/whd/overtime2019/.

 

By Dave Sorem, P.E. ECA Government Affairs Chairman email: [email protected]