A new final overtime rule will raise certain employee earning levels to account for growth and changing pay practices, the Department of Labor announced September 24, making an estimated 1.3 million workers eligible for overtime pay in the new year.
The fresh rule leaves out about 2.8 million workers who would have received eligibility under an overtime rule proposed by the Obama administration in 2016.
“For the first time in over 15 years, America’s workers will have an update to overtime regulations that will put overtime pay into the pockets of more than a million working Americans,” acting U.S. Secretary of Labor Patrick Pizzella said in a statement. “This rule brings a commonsense approach that offers consistency and certainty for employers as well as clarity and prosperity for workers.”
The department requires employers to pay “time-and-a-half,” or 1.5 times an employee’s regular pay rate, for each hour of work beyond 40 hours. Original thresholds to reach to qualify this were set in 2004, and employees had to make below $23,660 a year or below $100,000 a year if they were “highly compensated employees,” a term used to describe lawyers and doctors.
Restaurant employees will now qualify for overtime pay if their annual salary falls below $35,568, as the new rule raises the standard salary level from $455 to $684. The rule also raised the total annual compensation level for highly compensated employees to $107,432.
The rule also allows restaurants and other employers to use certain bonuses and incentive payments, including commissions, to satisfy up to 10 percent of the standard salary level.
The new rule’s increases fall below the figures in the Obama administration’s proposal. That rule would have had the standard salary level as $913 a week, or $47,476 a year, and extended overtime pay to more than 4 million workers.
That proposal was also tied to inflation, leading the yearly total to have increased to $51,064 by this year and to $55,068 by 2022. The Trump administration's final rule is not explicitly tied to inflation but acknowledged the need for more frequent updates.
“Experience has shown that fixed earning thresholds become substantially less effective over time,” the department’s wage and hour division said in a factsheet published this month.
The 2016 rule, proposed in May of that year, was enjoined by the U.S. District Court for the Eastern District of Texas in November of that year after officials from 21 states sued the Department of Labor in response.
The U.S. Court of Appeals held the rule in suspension pending further rulemaking. Rather than continuing the suit, the Trump administration’s Department of Labor penned their own rule.
A full draft of the rule is expected Wednesday. The new rule will go into effect on January 1, 2020.