On September 24th, 2019 the U.S. Department of Labor (DOL) has announced an updated and final rule regarding overtime regulations. This ends a journey which has lasted over three years, through two different Presidential administrations.
For context, let’s remember where we have come to understand these new regulations:
The original change in the overtime rules were first announced in May of 2016. The main components then were:
- The new salary test is increased to $47,476 annually or $913 weekly, and is set at the 40th percentile of earnings of full-time salaried workers in the lowest wage Census Region, which is the Southern Region
- The Highly Compensated test, currently $100,000 annually is now $134,004 -90th percentile of full-time salaried workers nationally
- There is now a mechanism for automatic increases every three years to maintain the 40th or 90th percentiles – next scheduled for January 2020
- Non-discretionary bonuses and incentive payments such as commissions can now be included to satisfy up to 10% of the $47,476 – previously these were not included
- The Effective date for implementation of the new regulations is December 1, 2016
I outlined these in a blog back in May of 2016.
This rule was suspended in November of 2016.
After President Trump was elected, the DOL began a re-do of the rules and asked for more than one delay. From time to time reports would come out as to the potential changes, but nothing definitive.
Let’s discuss the new rules:
- The new salary level is raised from the current $455* per week to a new level of $684 per week, or $35,568 annually for a full-time employee
- The “Highly Compensated” exemption** salary level increases from $100,000 to $107,432 annually
- Nondiscretionary bonuses, incentives and commissions, can now be used by employers to satisfy up to 10% of the salary level
- There are revised special salary levels for workers in U.S. Territories and for workers in the motion picture industry
* Connecticut currently requires the minimum salary threshold to be $475.
** Connecticut does not recognize the Highly Compensated exemption
There will be more final details coming out by the DOL over the coming weeks. This new rule becomes effective in a little over 90 days on January 1, 2020.
What should employers do now?
- Review all employees who are currently exempt or salaried – those employees that receive a specific salary regardless of how many hours they work – and ensure their salary is at least $684 weekly or $35,568 annually
- If some of your exempt employees do not make at least these minimum rates, you will need to either increase their rate to that level, or transition their status to non-exempt or hourly
- If you transition affected employees to non-exempt, they will now be eligible for overtime pay when working more than 40 hours in a work week
Finally, Connecticut employers will need to keep an open ear to how the Connecticut DOL will react to these new rules as there are inconsistencies in some of the regulations.
Also – don’t forget: on October 1 of this year, the minimum wage increases to $11 per hour, and on September 1, 2020, the minimum wage in Connecticut will increase to $12 per hour!