Wednesday, January 30, 2019

Get Ready for Major Changes to Overtime Pay Rules in 2019

The long-awaited changes to the rules regarding overtime pay will likely take effect later this year, so employers may want to start budgeting for these changes now. The Department of Labor has announced that it will set forth proposed changes to the rules regarding overtime pay in March 2019. While the rules can take effect as early as 30 days after the Department proposes them, usually the delay is between 3 to 6 months. So, I would expect the new overtime rule to be in place by the summer or fall of this year.

The Fair Labor Standards Act currently requires that employees making less than $23,660 ($455 per week), to be paid 1.5 times their standard hourly wage for each hour worked over 40 in a week. Back in 2016, the Obama Administration’s Department of Labor proposed increasing the salary for which an employee would be entitled to overtime to $47,476 annually or $913 per week. The rule was set to take effect in December 2016 until a court blocked its implementation due to the Department of Labor’s failure to comply with all of the legal requirements necessary to pass the rule. Obama’s Department of Labor did not have enough time to pass a new overtime rule before he left office, and Trump’s Department of Labor announced that it would not implement the Obama Administration’s proposed overtime rule and would instead pass a new one.

Trump’s Department of Labor has been slow getting the revised rule out, but it claims that the new rule will be unveiled in March. Because the Trump Administration, unlike the Obama Administration, has been very friendly to business, I would not expect the increase in the salary threshold for employees to be eligible for overtime to be as high as that proposed by the Obama Administration. However, I would expect a pretty decent rise, probably into the high $30K to low $40K range ($650 to $850 per week), which will mean that many more employees will be eligible for overtime pay. What remains to be seen is whether this salary threshold will automatically increase every three years like the Obama Administration’s proposal.

The new overtime rule could increase your labor costs, so you should begin budgeting for this increase now. Also, make sure that your payroll department is aware of the new rules, and that you are paying employees properly. Stay tuned to this blog for updates on the implementation of these overtime rules.