WASHINGTON - The U.S. Department of Labor will extend mandatory overtime pay to more than 1.3 million U.S. workers as of January 1.

 

Since 2004, salaried workers are eligible for overtime pay only if they earn less than a $23,660 salary. The new, long-awaited rule raises the threshold to $35,568. 

 

“For the first time in over 15 years, America’s workers will have an update to overtime regulations that will put overtime pay into the pockets of more than a million working Americans,” Acting U.S. Secretary of Labor Patrick Pizzella said. “This rule brings a common sense approach that offers consistency and certainty for employers as well as clarity and prosperity for American workers.”

 

More specifically, 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, and allows employers to count a portion of certain bonuses/commissions towards meeting the salary level. The new thresholds account for growth in employee earnings since the currently enforced thresholds were set in 2004.

 

The rule:

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

In 2016, the Labor Department doubled the salary threshold to $47,000, but the decision was invalidated after a Texas judge ruled the ceiling was so high it could sweep in management workers.

 

So what does this rule mean for employers? More workers must receive overtime pay, potentially leading to more lawsuits. The higher threshold could push some employers to cut some workers' hours.

 

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