The Department of Labor issued a final rule stating employees who earn less than $35,568 per year are now eligible for overtime pay. The current threshold is $23,660, which was last adjusted in 2004. The rule takes effect January 1, 2020.
Employees who make more than the new annual threshold of $35,568 and meet the Fair Labor Standards Act (FLSA) duties requirements are considered exempt from any overtime pay. This ruling ensures eligible, non-exempt employees earn time-and-a-half pay for hours exceeding a standard 40-hour workweek.
Employers will likely have to reclassify some employees to comply with the new rule. It’s important to classify employees correctly to avoid potential lawsuits, which can be costly for businesses. There were no changes to the duties test determining eligibility for an executive, professional, administrative, computer and outside sales exemption from overtime.
The updated threshold is lower than the Obama-era overtime proposal of $47,000. In that instance, a federal judge sidelined the effort, citing administrative overreach by the Department of Labor. Currently there are no built-in adjustments included, but the final rule states the DOL will assess the validity of the threshold more regularly moving forward.
If you have questions about how this ruling may affect your business or employee classifications, please contact our HR experts at 913.345.0440.
