It’s time to sharpen your pencils (again)!
The Department of Labor (DOL) has finalized an increase to the salary threshold for overtime eligibility from $23,660 per year to $35,568. This increase is slightly higher than the $35,308 threshold proposed in March. The new regulations will also allow employers to count non-discretionary bonuses/incentives/commissions for up to 10% of an employee’s salary level as well as increase the total annual compensation requirement for “highly compensated employees” from $100,000 to $107,432 per year.
Other key highlights of the new regulations include:
- No automatic adjustments to the salary threshold (although the DOL does intend to propose updates periodically).
- No differences based upon geographic region of the country.
- No changes to the duties test.
The change to the salary threshold will expand overtime eligibility to more than 1.3 million U.S. workers. While this expansion is considered a win for employees, more than half of those individuals who would have been covered under the Obama proposed threshold in 2016 will not see the protection they would have been afforded by way of that proposition. The proposed change was challenged in court and ultimately struck down over concerns the new threshold was too high. Unfortunately, by the time the 2016 rule was overturned, many employers had already incurred significant time and expense to ensure compliance with it.
What To Make of This Change
Baker Tilly Vantagen professionals can offer proactive guidance and recommendations on how to ensure compliance with this new overtime rule. The DOL continues to focus on identifying wage and hour violations. A major change like this provides a perfect reason to complete a full review of your workforce and mitigate any exposure to costly fines and penalties.