Law

Special Blog! New Proposed Rule: Overtime Update

March 18, 2019

The U.S. Department of Labor released a proposed update to the current overtime rule. Learn what the proposed rule is and who it impacts.

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On March 7, 2019, the U.S. Department of Labor released a proposed update to the current overtime rule. Before you panic, it’s not an entirely new rule, it’s merely an update to the already existing overtime regulations.

Current Overtime Law

An employee’s status determines if they are eligible for overtime pay. An exempt employee is one that receives a salary and is not eligible for overtime pay. Whereas non-exempt employees receive overtime pay after 40 hours in a workweek. This overtime pay is 1.5 times their regular hourly rate.

Under the current FLSA rules, the exempt employee must receive an annual salary of at least $23,600. Along with annual salary standards, there are also weekly salary limits. These employees must also receive a weekly salary of $455 or higher. If the employee makes less than $455 per week, they must receive overtime pay when they exceed 40 hours in a workweek. So although exempt employees are free from overtime pay in general, there are exceptions. This salary level was set in 2004, now 15 years ago (shocking we know)!

Proposed Overtime Update

Man Proposing "will you increase the standard salary level"

Now for the part you’ve been waiting for, that proposed update. The update would keep the general outline of the current rule, with a small adjustment for cost of living increase over the past 15 years. The Official Data Foundation states that between 2004 and 2017, there was an average inflation rate of 2.02% per year. According to the Bureau of Labor Statistics, prices are 29.76% higher in 2017 than in 2004.

Put simply, something that cost $100 in 2004, cost $129.76 in 2017. With that being said, it’s no wonder the Department of Labor thought it necessary to increase the salary limit! The proposal takes current wage data into account, projected through January 1, 2020. The increase will bump the minimum salary per week from $455 to $679. This would add up to $35,308 per year.

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The Department of Labor conducted research and got input from the public while developing the proposal. They stated there was “overwhelming agreement” that the 2004 level needed updating. The proposal also specifies a commitment to periodically review the salary threshold level, which would require a “notice-and-comment rulemaking.”

Next Steps

Before you start adjusting salaries or worrying about exempt employee’s weekly pay, remember, this is a proposal at this point and not enacted or finalized just yet. It’s been submitted to the Office of the Federal Register (OFR) for publication first. One of the wonderful things about our government is that you, as “the public,” have a voice! If you’d like to comment on this update, you have 60 days, along with the rest of the public. The 60 day period begins on the day of publication.

The Department of Labor encourages anyone interested to submit comments. You can do so electronically at
www.regulations.gov, using the RIN 1235-AA20 in the search bar once the proposal hits publication. The DOL states they’ll consider all comments submitted on time while developing a final rule.

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