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Trump Administration Proposes New Overtime Regime

June 19, 2019

The U.S. Department of Labor (DOL) has proposed expanding overtime pay eligibility to approximately 1.3 million workers. What happens if these regulations are finalized? We explore here.

*Editor's Note: This legislation has been finalized as of September 24, 2019--Check out our blog, U.S. Department of Labor Extends Overtime Pay for the details.

Under the Fair Labor Standards Act (FLSA), salaried employees who earn at least $455 per week aren’t eligible for overtime pay if the nature of their job duties are executive, administrative or professional. But the rules might soon change if the U.S. Department of Labor (DOL) finalizes regulations that were proposed earlier this spring.

Ongoing Saga

The FLSA amendments, if finalized, would expand eligibility to overtime pay to approximately 1.3 million workers. But that increase is far less substantial than the increase under legislation that was passed under the Obama administration. The previous amendments would have provided overtime pay to another 4 million workers. However, those changes were blocked by a federal judge in 2016. And the Fifth Circuit dismissed the DOL’s appeal in 2017.

The most recent proposal would increase:

  • The overtime limit from $455 per week (around $23,660 annually) to $679 per week (around $35,308 annually) in 2020 for qualifying “white-collar” employees, and
  • The annual salary threshold for “highly compensated employees” (HCEs) from $100,000 to $147,414.

HCEs aren’t eligible for overtime pay, regardless of the duties they perform or the number of hours they work each week.

The proposed changes wouldn’t change the duties test for overtime pay exemption. And they don’t include automatic adjustments to the salary thresholds for inflation or require different levels based on the cost of living where an employee lives.

Next Steps

What happens if the latest DOL proposal is finalized? If enacted, the increased thresholds would go into effect on January 1, 2020. That gives employers only a short time to act. Possible courses of action include:

  • Budgeting for more overtime pay in 2020,
  • Hiring more nonexempt workers so fewer would need to work more than 40 hours per week, and
  • Increasing wages or salaries for employees near the thresholds to exceed the new limits and potentially avoid overtime pay.

What’s the latest?

In June, Congress heard testimony about the latest DOL proposal, and the feedback was mixed. As of now, the fate of the federal proposal remains uncertain. However, some states — including Massachusetts and New York — are considering taking overtime matters into their own hands. In particular, the Massachusetts state legislature is currently considering a rule that would raise the overtime threshold to $64,000 (roughly $1,231 per week) by 2024. Other state legislatures are considering similar bills.

Got Questions?

Stay tuned for updates. Our business advisory professionals are atop the latest state and federal labor law changes, and we can help you communicate with employees who would be affected by changes to the overtime rules. Contact us to discuss the most advantageous course of action for your workplace.

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