September 30th, 2019
Take Heed of the Newly Updated Overtime Rule
The Trump Administration’s version of the newly updated overtime rule is less onerous than Obama’s, but it still will have an impact.
Door and window manufacturers likely will feel a sting, but not searing pain, as a result of the U.S. Labor Department’s recent final rule raising the threshold at which a worker’s salary still qualifies them to receive overtime pay. In essence, the rule could have been a lot worse.
The rule, announced September 24 and taking effect Jan. 1, 2020, essentially says that a person making as much as $35,568 per year can still be eligible for overtime pay unless the employer can prove that person carries out executive, administrative or professional duties. The reasoning is that if a person makes less than that, it’s highly unlikely that person holds a white-collar management job.
The new $35,568 threshold represents an increase from the current $23,660 per year, but it’s far below the $47,476 per year threshold that the Obama Administration had put into effect when it issued its final rule in May 2016. That $47,476 standard never went into effect, because a U.S. District Court first stopped the Labor Department from enacting the rule and later invalidated it, saying the Labor Department was depending too much on the salary figure to determine who should get time-and-a-half pay for working over 40 hours per week.
Salaries aside, here’s another way to estimate the impact: The Obama Administration’s proposed rule would have benefited an estimated 4.2 million Americans. In contrast, the new, revised rule will make roughly 1.2 million currently exempt employees eligible for overtime.
If your company has white-collar executives, administrators, or professionals who get salaries under $35,568 per year, you now have two choices: Move those people to hourly status or be prepared to answer regulators’ inquiries as to why those people should be exempt. Given the pressure in recent years to increase wages and to retain key people, it’s possible that only a few of your staff members will be affected. You have until January 1 to check.
As before, outside salespeople are exempt from overtime pay rules. If a state law invokes a higher threshold than the new Federal rule, the state law applies.
The Labor Department said in its proposed rulemaking earlier this year that the $23,660 threshold needed to go up so that the standard could “more effectively serve its purpose” of winnowing out people in non-management positions. That, in effect, was the same view that the Obama administration’s labor department took. But under President Donald Trump, the current labor department believes that the $47,476 standard would have authorized overtime to people in real management jobs.
One group that critics of the Obama rule were particularly worried about involved assistant managers at stores and coffee shops. Many assistant managers work long hours, so shifting that class of people to overtime eligibility was seen as a potential danger to companies’ finances.