By Ben Schaefer
The U.S. Department of Labor announced a final rule on overtime pay that could have sizable impacts for workers, businesses, and governments across the country.
The biggest change in the regulation is the maximum level below which salaried individuals must be paid time-and-a-half for any time in excess of 40 hours per week.
As it stood before this change, the maximum weekly salary one could earn and still qualify for overtime pay was $455. It will now stand at $913—a more than doubling of the current level. Calculated annually, this is a move from $23,660 to $47,476.
This number will automatically adjust, every three years beginning in 2020, to the 40th percentile of full-time salaried income in the lowest-income Census region of the country (currently the South); the initial amount was calculated through this method as well. There is also a provision that allows some non-discretionary bonus pay to be counted under certain circumstances.
While the salary level has been altered in this regulatory action, the Fair Labor Standards Act—the law which governs many of the nation’s labor rules and under which overtime pay is regulated—is not itself amended and the “duties test” that regulates which positions/functions qualify for overtime is not changed.
According to the department, this rule—which goes into effect Dec. 1—will cover approximately 4.2 million additional workers across the country. As part of the release of this rule, the department has created fact sheets for certain sectors and how they may be impacted; this includes information specific to state and local governments (in addition to non-profit organizations and institutions of higher education). To comply with the new rule, the department suggests four options to employers:
- Pay the time-and-a-half for overtime hours worked
- Raise workers’ salaries above the new threshold
- Limit workers’ hours to 40 per week
- Some combination of the above strategies
While state and local governments can certainly choose from these options, they also have the ability to utilize compensatory time in lieu of overtime pay in certain circumstances (as outlined in the informational sheet linked above). The fact sheet also lists those employees who will not be affected by the final rule, including police and fire employees in small agencies, elected officials and their policymaking appointees/personal staff/legal advisors not subject to civil service laws, and legislative branch employees not subject to civil service laws.
While the actual economic and personal impacts of the regulatory change may not be known for some time, the immediate reactions have been mixed. Proponents point to the rule having not been updated in 40 years and its potential benefits to impacted workers, while critics are concerned about restricting hiring and wider economic constrictions. NCSL will continue to follow this change through its rollout and engage with the department during the process.
The department will be holding a webinar June 8 at 1 p.m. ET to discuss the new rule and its impact on state and local governments. You can register for that event here.
You can also read the full text of the final rule here.
Ben Schaefer is a policy specialist in NCSL’s Washington D.C. office