Proposed Overtime Rule Announced

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On March 7, the Department of Labor released its revised overtime rule. The proposed rule is a significant improvement over a 2016 overtime rule promulgated by President Obama’s administration.

Under current law, employees with a salary below $455 per week ($23,660 annually) must be paid overtime if they work more than 40 hours per week. Workers earning more than this salary level may be eligible for overtime based on their job duties.

The proposed rule would update this salary threshold, which was set in 2004. Specifically, the proposed rule would do the following:

  • Raise the overtime exemption salary threshold to $35,308/year ($679/week) by reverting to the methodology used in the 2004 rule that focused on the 20th percentile of full-time wage earners in the lowest income region of the company (identified as the South) as well as the retail industry. 
  • Increase the total annual compensation requirement for “highly compensated employees” (HCE) from the currently-enforced level of $100,000 to $147,414 per year.
  • Allow nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10 percent of the standard salary test requirement.

The proposed rule does not implement automatic salary adjustments, but the proposal asks for comment on conducting regularly scheduled rulemakings to update the salary threshold.

The proposed rule builds on a 2017 commitment from President Trump and Labor Secretary Acosta to address overtime thresholds and calculation methodology.  A 2016 overtime rule promulgated by the Department during President Obama’s Administration would have doubled the minimum salary level for overtime exemptions from $23,660 to nearly $48,000.  A Texas federal court struck down the rule in November 2016.  When President Trump took office in 2017, the DOL solicited additional public comments on whether the current threshold of $23,660 set in 2004 should be updated for inflation, and whether there should be multiple levels based on region, employer size, industry or other factors.

The proposed rule will be published in the Federal Register shortly, which will trigger a 60-day public comment period.

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