The U.S. Department of Labor announced a final rule for overtime pay that it said would make 1.3 million American workers eligible for extra pay under the Fair Labor Standards Act.
In the final rule that was announced Tuesday, the Labor Department 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), as well as raising the total annual compensation level for “highly compensated employees” from the currently-enforced level of $100,000 to $107,432 per year.
It is also allowing 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. In addition the rule revises the special salary levels for workers in U.S. territories and in the motion picture industry.
The final rule will take effect on Jan. 1, 2020. “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 in a statement. “This rule brings a commonsense approach that offers consistency and certainty for employers as well as clarity and prosperity for American workers.”
The Obama administration had proposed expanding overtime pay, but the proposed rule met with legal challenges and never took effect after being suspended by a federal judge in 2016. The last time the overtime regulations were effectively updated was back in 2004.
“Today’s rule is a thoughtful product informed by public comment, listening sessions, and long-standing calculations,” stated Wage and Hour Division Administrator Cheryl Stanton of the Labor Department. “The Wage and Hour Division now turns to help employers comply and ensure that workers will be receiving their overtime pay.”
The final overtime rule also updates the earnings thresholds that are necessary to exempt executive, administrative or professional employees from the Fair Labor Standards Act’s minimum wage and overtime pay requirements. It enables employers to count a portion of certain bonuses (and 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 Labor Department estimates that 1.2 million additional employees will be entitled to minimum wage and overtime pay thanks to the increase to the standard salary level and another 101,800 workers will be entitled to overtime pay as a result of the increase to the HCE compensation level, for a total of approximately 1.3 million who will benefit from the rule change.