Employers will have until May 21 to weigh in on the U.S. Department of Labor’s proposal to increase the minimum salary threshold for mandatory overtime to $679 per week, the equivalent of $35,308 per year. The current threshold is $455 per week, or $23,660 per year.
The department announced the long-awaited rule change on March 7. In addition to the salary level, the proposal would:
- increase the total annual compensation requirement for “highly compensated employees” from $100,000 to $147,414 per year;
- periodically review the salary threshold to see if increases are needed;
- allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level; and
- make no changes to the job duties test.
Significantly, the proposal does not include automatic adjustments to the salary threshold in the future. When a previous version of the rule was adopted during the Obama administration, employers faced annual COLA increases in the threshold, which would have increased to more than $47,000 per year. That rule was subject to an 11th-hour injunction and eventually was struck down by a federal judge in Texas.
More information about the proposed rule is available at www.dol.gov/whd/overtime2019. The Department encourages any interested members of the public to submit comments about the proposed rule electronically at www.regulations.gov, in the rulemaking docket RIN 1235-AA20. Comments must be received by May 21, 2019 to be considered.
The rule is expected to take effect on Jan. 1.
Employers who have exempt employees who are paid below the new threshold. Essentially, employers have two options: Either start paying them overtime, even though they’re salaried employees, or increase their annual salary to the new threshold so they can remain exempt from overtime requirements.