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New federal rule makes more workers eligible for overtime pay

New federal rule makes more workers eligible for overtime pay

By Ali Tozier, Associate

On September 24, 2019, the U.S. Department of Labor announced a final rule that makes 1.3 million American workers eligible for overtime pay. This new rule will become effective on January 1, 2020.

Here is an overview of what it changes:

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

How this might impact you:

  • If you are an employer, you need to review which employees are paid hourly and which are paid on salary. As of January 1, 2020, all employees who make the equivalent of $35,568 per year or less will need to be paid on an hourly basis, which means hours need to be kept track of and overtime needs to be paid. For instance, if you consider an employee to be “salaried” and do not count that employee’s hours, but pay that person only $35,000 per year, you need to re-evaluate how compensation is calculated for that employee.
  • If you are an employee and you are making less than $35,568 per year, but your employer never keeps track of your hours and you are working more than 40 hours per week, you may need to approach your employer about complying with the new overtime law.
  • If you are an employee who makes less than $107,432 per year but you do not believe your job meets the “duties test” for executive, administrative, professional and outside sales employees (visit DOL’s site here to understand these categories), then you may be eligible to receive overtime pay for every hour over 40 hours you work in one week.
  • If you are an employer, you may want to ensure your employees are properly categorized as “exempt” or “non-exempt” in relation to the duties tests.

The final rule is available online.

If you think you may need assistance navigating the new overtime rules as they apply to your situation, our employment law attorneys are here to help.