Revised Federal Overtime Salary Requirements
The U.S. Department of Labor issued a final rule on Sep. 24, 2019, increasing the salary-level threshold for mandatory overtime from $455 to $684 a week ($35,568 a year). Overtime pay will be required for all non-exempt employees making less than the salary-level threshold and working more than 40 hours in a single work week. The final rule is effective Jan. 1, 2020, and is estimated by the Department of Labor to extend overtime protections nation-wide to more than one million workers not currently eligible under federal law.
In reviewing the SCAC Wage and Salary Report, SCAC staff anticipates that the new salary threshold could have a significant impact on county finances. Out of 203 positions included in the survey there are 87 positions where the minimum salary in 10 or more counties falls below the $684 a week threshold. Counties should begin reviewing policies and schedules to avoid the necessity for overtime hours by individual employees.
According to the U.S. Department of Labor under the September 2019 final rule:
- Workers who do not earn at least $684 a week ($35,568 a year) would have to be paid overtime, even if they're classified as a manager or professional.
- Nondiscretionary bonuses and incentive payments (including commissions) paid on an annual or more frequent basis may be used to satisfy up to 10 percent of the standard salary level.
- The Department of Labor intends to propose updates to the salary threshold regularly to ensure that these levels continue to provide useful tests for exemption. Updates would not be automatic and would continue to require notice-and-comment rulemaking.
The revised rule does not change the current exemptions to the overtime rule. Certain employees that meet the "duties" test will continue to be exempt under the revised rule.
What determines if an employee falls within one of the exemptions?
To qualify for an exemption in this rule an employee generally must:
- be salaried, meaning that they are paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the "salary basis test");
- be paid at least a specified weekly salary level, which is $684 per week (the equivalent of $35,568 annually for a full-year worker) under this final rule (the "salary level test"); and
- primarily perform executive, administrative, or professional duties, as defined in the Department's regulations (the "duties test").
The revised overtime rules do not change the ability of governmental entities to give employees compensatory or "comp" time in lieu of overtime pay. Under certain prescribed conditions, employees of state or local government agencies may receive compensatory time off, at a rate of not less than one and one-half hours for each overtime hour worked, instead of cash overtime pay. Most state and local government employees may accrue up to 240 hours of comp time each year. Law enforcement, fire protection, and emergency response personnel and employees engaged in seasonal activities may accrue up to 480 hours of comp time. An employee must be permitted to use comp time on the date requested unless doing so would "unduly disrupt" the operations of the agency.
This announcement does not constitute legal advice. It is intended for general information on this topic. Counties should consult with their local employment attorneys to determine the employees impacted by the revised rule.
More information about the impact of the final rule is available at: https://www.dol.gov/whd/overtime2019/.
The SCAC Wage & Salary Report can be found at: https://www.sccounties.org/sites/default/files/uploads/publications/wagesalaryreport_fy2018.pdf