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DOL Proposes $35,000 Salary Threshold for Overtime Exemptions

Wed May 1, 2019 Publications

In 2016, the US Department of Labor was planning to implement new modernized overtime rules which promised to expand overtime eligibility to 5 million workers, including nearly all salaried employees who earn up to $47,476. Those plans were enjoined by a federal district court in late 2016. The former administration’s appeal of this enjoinder was held in abeyance by the Fifth Circuit Court of Appeals pending further rulemaking under the current administration. Recently, on March 7, 2019, the DOL proposed a more modest update to the salary threshold for overtime exemptions.

Under the current regulations which date back to 2004, workers making less than $23,660 per year or $450 per week must be paid overtime for hours worked over 40 per week. The DOL’s 2016 proposal would have increased that threshold to $47,476 or $913 per week. Under the new regulations, workers making less than $35,308 per year or $679 per week must be paid overtime for hours worked over 40 per week. To be exempt from overtime, those making over the $35,308 threshold must also pass a “duties” test to establish them as exempt administrative, executive or professional employees.

The salary for “highly compensated employees” who are exempt from overtime will be increased from $100,000 to $147,414 which, interestingly, is $13,000 higher than the DOL’s 2016 rule.

Under the new rules, to meet the salary threshold, employers may count certain nondiscretionary bonuses and incentive payments like commission towards 10% of the threshold salary. If an employee does not earn sufficient bonuses and incentive to reach the threshold in a given year (any 52 week period), then the employer can make a “catch-up” payment within the first pay period of the following year to count toward the prior year’s salary.

No changes to overtime protections are made for police officer, firefighters, paramedics, nurses, laborers, and non-management employees in maintenance, construction and similar occupations.

Updates to the salary levels would be made every four years. The rules are anticipated to take effect in January 2020.

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