New Overtime Rule Goes into Effect January 1, 2020

  • Posted on: Dec 30 2019
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The U.S. Department of Labor’s (DOL) final overtime rule becomes effective January 1, 2020. The best way for employees and employers to understand their rights and responsibilities under the new rule, respectively, is to consult an experienced employment lawyer.

What’s in the DOL’s new overtime rule?

In short, the rule increases the salary thresholds for exempt status, which the DOL says will make an additional 1.3 million U.S. workers eligible for overtime pay. 

Since 2004, salaried workers who (1) earned at least $455 per week or $23,660 annually, and (2) meet certain white-collar exemption requirements, have been treated as exempt employees, not eligible for overtime pay. In addition, to be considered exempt, employees must meet the duties test; those who perform administrative, executive and professional duties are likewise not entitled to overtime pay.

Under the incoming overtime rule, the salary threshold increases to $684 per week ($35,569 for a full-time employee). The DOL’s new overtime rule also applies to those classified as “highly compensated employees,” raising the exemption threshold for such workers from $100,000 to $107,432 per year.

At the same time, the new rule allows employers to meet up to 10 percent of the new salary threshold with bonuses, incentive pay, and commissions, as long as such compensation is paid at least quarterly. If the employee fails to meet any preconditions for receiving those forms of pay, however, the employer might be on the hook for overtime pay retroactively to that worker.  

It is noteworthy that the new overtime rule does not alter the duties tests. Although the white-collar exemptions for executive, administrative and professional duties remain the same, it bears mentioning that recent court rulings have redefined their application. Finally, the new rule does not contemplate additional updates to the salary threshold amounts. Therefore, the 2020 salary thresholds will remain in place until the DOL proposes further changes. 

Why This Matters

Employers must take proactive measures to identify any currently exempt employees who fall below the 2020 salary thresholds and:

  1. Start treating those employees as non-exempt after January 1, 2020 or 
  2. Increase their compensation to the new threshold amount 

Determining which approach is most cost-effective requires proper legal representation. Similarly, a skilled employment lawyer can advise you about properly using the white-collar exemption, including for salaried employees above the threshold. 

Employers in New York should also note that higher salary threshold amounts than the DOL’s overtime rules are already in place for workers in New York City, Long Island, Westchester and elsewhere.

The current threshold for employers in New York City is $1,125 per week – regardless of how many employees the employer has. For employers in Nassau, Suffolk and Westchester, the threshold increases to $975 per week as of 12/31/2019, $1,050 per week as of 12/31/2020, and $1,125 per week as of 12/31/2021. For employers in all other New York counties, the threshold increases to $885 per week as of 12/31/2019, and $937.50 per week as of 12/31/2020.

While the new thresholds will increase the wages of workers in New York and throughout the nation, the best way to protect your right to fair pay is to consult and experienced wage and hour attorney.

Posted in: Wage & Hour

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