New rule reflects current U.S. salary growth and overtime exemptions after challenges in the courts.
9/27/2019 10:30
A new overtime rule will take effect, for the first time in over 15 years, on Jan. 1, 2020, meaning accounts receivable management companies will want to start reviewing overtime and employee exemption policies.
The U.S. Department of Labor sought to double the overtime thresholds in 2014, but the changes were invalidated in the courts two years later on the grounds the department did not have the authority to make such a significant change, according to a report from Vox.
The new rule makes 1.3 million workers eligible for overtime pay and 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), according to a news release from the Department of Labor.
Additional changes in the new rule include:
- “Raising the total annual compensation requirement for ‘highly compensated employees’ from the currently enforced level of $100,000 per year to $107,432 per year;
- Allowing 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;
- Revising the special salary levels for workers in U.S. territories and the motion picture industry.”
Under the Fair Labor Standards Act (FLSA), the new overtime thresholds account for growth in employee earnings since the currently enforced thresholds were set in 2004, according to the news release.
Before the new rule takes effect, companies should review their overtime, scheduling, and employee exemption policies to determine which employees meet the new salary thresholds.
“The final rule updates the earnings thresholds necessary to exempt executive, administrative, or professional employees from the FLSA’s minimum wage and overtime pay requirements,” according to the Department of Labor.
Tips for abiding by the rule changes are available through the Department of Labor’s Small Entity Compliance Guide.
The final rule also includes provisions to update the salary thresholds on a more regular basis through collecting comments and notice of proposed rulemakings going forward.
Read more about the history of the rule and changes considered in 2016 in Collector magazine: Clock In, Clock Out: What You Need to Know About the New Federal Overtime Rule