The Department of Labor announced on March 7, 2019 a proposed rule that the agency estimates would entitle more than a million additional American workers eligible for overtime.
Since 2004, employees with a salary level below $455 per week are required to be paid overtime if they work more than 40 hours within a week. Under the new proposal, the salary level would increase to $679 per week, which is equal to an annual amount of $35,308. As a note, overtime eligibility is based upon job duties. See below for more details on the proposal.
• The proposal increases the total annual compensation requirement for ‘highly compensated employees’ from $100,000 to $147,414 per year
• A commitment to periodic review to update the salary threshold which would require notice and comment rulemaking.
• Allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid annually and more frequently to satisfy up to 10% of the standard salary level
• There was not any proposed changes for:
◦ Police Officers
◦ Fire Fighters
◦ Laborers including: non-management production-line employees
◦ Non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, and construction workers
• The proposal does not include any changes to the job duties test and no automatic adjustments to the salary thresholds
What is the Effective Date
Because this is in the NPRM stage, there currently is no effective date. The changes will become effective after the agency issues the finalized rule; generally, there is at least a 60-day period after the issuance of the final rule to implement the changes contained in the final rule.
This DOL Notice of Proposed Rulemaking (NPRM) is the first step to alert the public and stakeholders of potential changes to the current overtime rule. Once the proposed Overtime Rule is officially published there will be a 60-day comment period to provide the public an opportunity to comment on the proposed changes.
There is no immediate need for employers to take action; as we have seen in the previous attempt to change the Overtime Rule, the proposed changes may undergo additional revisions. Employers should avoid making any compensation and job position changes before the rule is finalized. However, there are proactive steps employers can start now to prepare for complying with any changes in the final rule. We recommend that employers begin auditing their current compensation practices and job descriptions; to determine whether there is a need to make salary adjustments to meet the new thresholds or make changes to exempt employees’ statuses.
Paylocity will continue to monitor the development of this proposed rule change and will provide additional communications on next steps once the agency makes more details available.
For more information regarding this proposed rule change including FAQs, please click here.
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This information is provided as a courtesy, may change, and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.