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New Overtime Law Took Effect January 1, 2020

In case you missed it over the holidays, the newest Department of Labor regulation went into effect on January 1, 2020. Why does it matter? If your company pays employees on a salary basis (i.e. employee is exempt from minimum wage and overtime as an executive, administrative, or professional employee) then the minimum salary threshold necessary to meet the new standards increased from $455 per week to $684 per week (equivalent to an annual salary of $35,568 per year). The new rule also allows employers to count a portion of certain bonuses (and commissions) towards meeting the salary level. What action is necessary? Review employee pay rates to make sure all salaried employees are earning at least the new minimum. Either bump an employee’s salary to meet the required salary level; or change the employee to an hourly rate and pay overtime.

What else is important? The new rule also raises the total annual compensation level for “highly compensated employees (HCE)” from the currently-enforced level of $100,000 to $107,432 per year. The salary rule also allows employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level, in recognition of evolving pay practices.

Where to go for more information? The Wage and Hour Divison webpage has more information about the final rule and the existing regulations that define executive, professional and administrative employees.

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