HR Compliance

Department of Labor Announces New Proposed Overtime Rule

By

Amy Double

| Mar 11, 2019

On March 7, 2019, the U.S. Department of Labor announced its proposed rule to increase the standard salary threshold under the Federal Labor Standards Act (FLSA) and extend overtime protections to more than a million American workers.

Below are five key provisions that – if finalized – would change the way employers nationwide would organize and compensate their workforce. The Department of Labor’s proposed rule seeks to:

  1. increase the standard salary level to $679 per week (equivalent to $35,308 per year); a 49% increase from the current level of $455 per week ($23,660 annually)
  2. increase the annual salary requirement for highly compensated employees to $2,834 per week ($147,414 annually), up from $1,923 per week ($100,000 annually)
  3. avoid automatically raising the salary level; however, the Department of Labor invites feedback on establishing a periodic review that would raise the salary level via the rulemaking process
  4. leave job duties tests unchanged
  5. allow employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10% of the standard salary level

According to U.S. Secretary of Labor Alex Acosta, “Our economy has more job openings than job seekers and more Americans are joining the labor force. At my confirmation hearings, I committed to an update of the 2004 overtime threshold, and today’s proposal would bring common sense, consistency and higher wages to working Americans.”

What’s next

Once the official proposed rule is published in the Federal Register, the public will have 60 days to submit comments and feedback. To do so, visit regulations.gov in the rulemaking docket RIN 1235-AA20.

Once the public comment period has concluded, the Department of Labor will review public feedback and comments in preparation to release a final rule.

Taking action

Currently, this is only a proposed rule, so employers do not need to make efforts to comply just yet. However, it is a good idea to take steps toward understanding just how substantially these proposed salary levels could cost your business. The Department of Labor estimates average transfers to employees to be approximately $429.4 million per year over the first ten years, with annualized direct costs to employers totaling approximately $120.5 million per year.

As we’ve mentioned in previous blog posts, employers should consider evaluating how many employees earn an annual salary below the new, proposed levels – $35,308 annually for standard, white-collar employees, and $147,414 annually for highly compensated employees.

It’s important also to get an idea of how much overtime employees earning below these levels work. Knowing that will help you estimate just how much a potential increase could cost your business.

Is your HR tech up to the task?

Your HR technology should play a pivotal role in managing any workforce challenge, including minimizing the impact of labor laws that could increase your labor costs. From scheduling, time tracking and overtime reports to hiring, training and compliance, the right HR software will offer a full-service, single-database application to handle it all.

To learn more about how Paycom can help, request a demo. For more information on developments around the proposed rule, subscribe to our blog.

This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.

About the Author

Amy Double

Amy, a tenured professional in sales and marketing with over 10 years of experience, is dedicated to creating content focused on helping organizations achieve their business goals. As an experienced writer, Amy is committed to researching and blogging about topics that affect businesses across multiple industries, including manufacturing, hospitality and more. Outside of work, Amy enjoys reading, entertaining and spending time with family.

See more posts by Amy Double