Colorado Capitol Report

DOL’s New Overtime Rule to be Effective January 1

DOL’s New Overtime Rule to be Effective January 1

The Department of Labor (DOL) announced its final overtime rule last week, updating the previous income threshold standard set by the Fair Labor Standards Act (FLSA).  There will be a quick turnaround to adopt this change and businesses should be ready for the new $35,568 standard come January 1, 2020.

DOL estimates that roughly 1.3 million more workers nationwide will be eligible for overtime through the new rule, and establishes that employees making less than $35,568 annually (or $684 weekly) are eligible for overtime, or in other words, non-exempt.  Additionally, the final rule also updates the highly-compensated category of employees from the current $100,000 standard to $107,432, and allows certain annual bonuses and commissions to be considered as much as 10% of an employee’s income.

To determine who qualifies for overtime:

  • An employee must be salaried (paid at least a weekly wage of $684) for the “salary test”; and,
  • Primarily perform executive, administrative or professional duties, i.e. the “duties test”

The DOL suggests employers have several options to consider for addressing employee designation and overtime costs prior to Jan 1, including:

  • ‘Increasing the salary of those affected workers to meet the minimum salary threshold,’
  • Consulting the DOL’s Wage & Hour Division FAQs
  • OR calling the DOL’s Wage & Hour wage hotline: 1-866-4-US-WAGE.

Although a threshold rule change was proposed under the Obama Administration in 2016, many businesses and business advocates, including the Colorado Chamber of Commerce, testified before the U.S. Small Business Administration (SBA) that the proposed 2016 threshold level of $47,476 would have created a drastic and unnecessary change to employment structures.  This large financial burden would hit employers directly by essentially eliminating salaried positions for employees making less than $47,000, and in many cases would have turned managers into timekeepers, eliminated flexible working situations, and particularly penalized non-profits and small businesses.

The Colorado Chamber testified before the DOL and SBA, submitted public comments and participated in a working group through the SBA over the last three years to ensure our employers were heard and a common-sense threshold was reached.  The SBA estimates that the difference between the 2016 and 2020 thresholds is a savings of roughly $524.8 million for employers.