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U.S. Department of Labor Scales Back Obama Overtime Rule


The United States Department of Labor (DOL) issued its long-awaited final rulemaking on employee overtime pay this week. The final rule updates earnings thresholds that must be reached to exempt executive, administrative, or professional employees from the Fair Labor Standards Act’s minimum wage and overtime pay requirements.

The new DOL rule raises the annual earnings threshold that triggers overtime pay (time and a half) for an employee working beyond 40 hours per week from $23,660 to $35,568. The annual earnings threshold increase will expand overtime pay eligibility to 1.3 million workers for the first time. The new, higher threshold accounts for growth in employee earnings since the currently enforced thresholds were set in 2004. Moreover, the final rule does not adjust the annual earnings threshold to inflation. Instead, any increase would require a new DOL rulemaking based on a determination of economic need.

The final rule replaces an Obama Administration rulemaking that raised the annual earnings threshold for overtime eligibility to $47,476. The Obama rule would have expanded overtime eligibility to 4.2 million workers. However, a federal court enjoined the rule from going into effect. The new overtime rule was written in response to the federal court action.
The final rule would also:

  • allow employers to count a portion of certain bonuses and commissions towards meeting the annual salary level;
  • raise the “standard salary level” from $455 to $684 per week (equivalent to $35,568 per year for a full-year worker);
  • raise the total annual compensation level for “highly compensated employees” from $100,000 to $107,432 per year; and
  • allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level.

Click here to view the Small Business Legislative Committee’s (SBLC) report on the final rulemaking.

The final rule takes effect on January 1, 2020.


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