U.S. Department of Labor Issues Final Overtime Rule, Effective Jan. 1, 2020
Tuesday, September 24, 2019, the U.S. Department of Labor issued a final federal ruling on overtime pay for companies operating in the U.S. These new thresholds account for growth in employee earnings since the current thresholds were set in 2004. The new ruling takes effect on Jan. 1, 2020. After that, an expected 1.3 million more American workers will become eligible for overtime pay under the Fair Labor Standards Act (FLSA).
The Current Federal Overtime Rules
Through Dec. 31, 2019, the current rules regarding overtime will remain in effect:
- The standard salary level is $455 per week, equivalent to $23,660 a year for a Full-Time Employee (FTE).
- The total annual compensation level for highly compensated employees is $100,000 per year.
- Employers may not use nondiscretionary bonuses and incentive payments to meet the standard salary level.
Overtime rules determine who is exempt from receiving overtime and who is deemed non-exempt. For salaried workers, workers earning a salary less than the standard salary level are non-exempt from receiving overtime. This means that should these employees work more than 40 hours in a week, they must be compensated overtime pay for that work.
The New Federal Overtime Rules
The new changes to the federal overtime ruling, effective Jan. 1, 2020, are as follows:
- The new standard salary level will be $684 per week, equivalent to $35,568 per year for an FTE.
- The total annual compensation level for highly compensated employees will increase to $107,432 per year.
- Employers will now be able to use nondiscretionary bonuses and incentive payments (including commissions) that they pay employees at least annually to satisfy up to 10 percent of the standard salary level.
Companies Need to Prepare Now for Jan. 1, 2020 New Federal Overtime Rules
These changes mean that approximately 1.3 million additional workers will now qualify for overtime compensation. It also means that your company must start preparing now – in Q4 2019 – by evaluating job descriptions, salary levels, exempt vs. non-exempt classifications. That is to say, you need to ensure that come January, you are compensating all employees who qualify for overtime appropriately.
And in Colorado, there’s a little more to these overtime laws. According to Colorado overtime laws, anyone qualifying for overtime under the federal overtime regulations may also receive this overtime compensation should they exceed 12 hours worked in a day or 12 consecutive hours worked, as well as if they exceed 40 hours worked in a week.
Consequences for Noncompliance
Failure to comply with federal overtime rulings can result in criminal prosecution and fines of up to $10,000. Further, repeat violations can result in civil money penalties of up to $1,100 per violation.
So, it is crucial to understand the changes that have been made to the federal overtime rules and to plan for January. In short, companies need to identify employees who now qualify for overtime compensation. You need to be sure to bear in mind Colorado’s overtime rules as well as this updated federal law.
- “Overtime.” Colorado Department of Labor and Employment, 2019. Accessed 24 September 2019.
- “Overtime Penalties.” ClickTime, 2019. Accessed 24 September 2019.
- “U.S. Department of Labor Issues Final Overtime Rule.” U.S. Department of Labor, 24 September 2019. Accessed 24 September 2019.