This week, the U.S. Department of
Labor announced a final rule that starting January 1, 2020, 1.3 million more
American workers will be eligible for overtime pay under the Fair Labor
Standards Act (FLSA). The final rule expands the definition of who “non-exempt” workers
are, i.e. workers who are subject to minimum wage and overtime pay
requirements. “Exempt” workers are exempt from minimum wage and overtime pay
requirements. Exempt workers include, for example, those meeting the tests
(including the salary-basis test) for the white-collar exemptions as executive,
administrative, or professional employees.
The rule is a watered-down version of an Obama Administration proposal, which would have expanded overtime pay to around 4
million workers by raising the maximum salary for which non-exempt workers are
entitled to overtime pay to $47,000 a year for full-time work, a
highly-compensated employee (“HCE”) exemption level of $147,000, and (perhaps
most importantly) tying future increases to the cost of living. That proposal
was met by fierce opposition from various business groups, who teamed up with
some Republican-controlled states to take the Obama Administration to court,
resulting in the rule being blocked by a conservative federal judge in 2017.
Here are the main changes the new rule makes:
·
raises the “standard salary level” to qualify for a white-collar
exemption from the current level of $455 per week (equivalent to $23,660 per
year for a full-year worker) to $684 per week (equivalent to $35,568 per year
for a full-year worker);
·
raises the total annual compensation level for “HCEs from the
current 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; and
·
revises the special salary levels for workers in U.S. territories
and in the motion picture industry.
What the new rule does not do is tie the standard
salary level to the rate of inflation. Adjusted for inflation, the $23,660/year
would rise to a current minimum salary level for non-exempt status of
$55,000/year. By also allowing employers to take nondiscretionary bonuses and
commissions into account in determining how much employees make and therefore
if they’re eligible for overtime pay, the rule immediately undercuts the impact
of the relatively small increase provided to the standard salary level. That
10% caveat creates room for confusion and discretion on the part of employers
that could adversely affect the very workers the rule is supposedly designed to
help. The $107,432/year level for HCEs is also laughably low for many parts of
the country where such a salary is much closer to the average.
After 15 years of no updates to overtime pay eligibility,
any update is welcome. But once again, the Trump Administration does far less
than is needed (and far less than was approved by the prior Administration) to
help vulnerable workers. The bottom line: If you make less than $35,568 a year
for full-time work, starting next year, you’re more likely to be entitled to
overtime pay. But, your employer can count up to 10% of your earnings from
things like bonuses and commissions to determine if you qualify for overtime.
Note that this new rule doesn’t affect the “outside sales exemption.”
Bryan Schwartz Law has written about overtime issues before here. If you believe you were denied overtime pay you were
owed, contact Bryan Schwartz Law today.
