WASHINGTON — A new regulation set to take effect Dec. 1 will make millions of Americans newly eligible for overtime pay.
The U.S. Department of Labor (DOL) rule will double the salary threshold—from $23,660 to $47,476 per year (from $455 a week to $913 a week)—under which most salaried workers are guaranteed overtime for hours worked in excess of 40 hours in a single week. (Hourly workers are generally guaranteed overtime pay regardless of their earnings level.)
Additionally, this new level will be automatically updated every three years.
“For decades, the salary threshold under which all white-collar, salaried workers qualify for overtime has failed to keep up with the rising cost of living,” says Labor Secretary Tom Perez. “In 1975, 62% of full-time salaried workers were eligible for overtime protection based on their pay. Today, only 7% are eligible under the outdated salary level. The current salary level is so low that it does not effectively identify which white-collar workers are entitled to overtime protection.”
In response to the new overtime rule, employers can pay time-and-a-half for overtime work, raise workers’ salaries above the new threshold, limit workers’ hours to 40 hours per week, or some combination of these.
The rule allows employers to use non-discretionary payments, bonuses and commissions to satisfy the minimum salary level requirements.
Overtime protections were first put into place by the Fair Labor Standards Act of 1938, and established the general standard that workers be paid time-and-a-half for any hours worked beyond 40 hours a week. In general, all hourly employees are guaranteed overtime, and salaried employees are presumed to have the same guarantee unless they make more than a salary threshold set by DOL and pass a test demonstrating they primarily perform executive, administrative or professional duties.
The new rule is not without opposition. For example, the National Retail Federation (NRF) filed suit in U.S. District Court in September in an attempt to block the rule, and legislators like Sen. James Lankford (R-OK) have introduced bills trying to delay the rule’s implementation.
Business owners are being reminded to prepare for implementation because there is no indication that there will be action taken prior to the Dec. 1 deadline to delay or change it somehow.
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].