The Department of Labor has released the final rule that will require businesses to pay overtime wages to employees who work more than 40 hours a week.
It’s a win for the estimated 1.3 million workers who will now be compensated for putting in long hours — but it’s a bitter defeat for the 2.8 million others who would’ve also gotten overtime under the original rule proposed by the Obama administration.
“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 commonsense approach that offers consistency and certainty for employers as well as clarity and prosperity for American workers.”
The 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 (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. In the final rule, the 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),
- raising the total annual compensation level for “highly compensated employees (HCE)” from the currently enforced level of $100,000 to $107,432 per year,
- 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,
- revising the special salary levels for workers in U.S. territories and in the motion picture industry.
The increases to the salary thresholds are long overdue in light of wage and salary growth since 2004. Nearly every person who commented on the Department’s 2017 Request for Information, participated at listening sessions in 2018 regarding the regulations, or commented on the Notice of Proposed Rulemaking agreed that the thresholds needed to be updated for this reason.
The Department estimates that 1.2 million additional workers will be entitled to minimum wage and overtime pay as a result of the increase to the standard salary level.
The Department also estimates that an additional 101,800 workers will be entitled to overtime pay as a result of the increase to the HCE compensation level.