Required Overtime Pay

Most significant is the initial salary level below which all salaried workers are entitled to overtime pay (at a rate not less than one and one-half times their regular rate of pay) when they work more than 40 hours in the workweek. Note that hourly workers have always been, and continue to be, entitled to overtime pay.

The new rules will raise the initial salary threshold from $455 a week to $913 a week ($47,476 for a full-year worker). This amount will automatically be adjusted every three years, beginning January 1, 2020. Each update will raise the initial threshold to the 40th percentile of full-time salaried workers in the lowest-wage Census region, estimated to be $51,168 in 2020.

Thus, all salaried employees who currently earn less than $47,476 a year must receive overtime pay, irrespective of their job functions. The new rules will allow up to 10 percent of the initial salary threshold to be met by non-discretionary bonuses, incentive pay, or commissions, provided these payments are made on at least a quarterly basis. This is a change in Labor Department policy.

Highly Compensated Employees (HCE) Ineligible for Overtime Pay

The new rules also update the total annual compensation level above which most “white collar” workers will be ineligible for overtime. The final rule raises this level to the 90th percentile of full-time salaried workers nationally, or from the current $100,000 to $134,004 a year. This amount will also be adjusted starting in 2020, and will increase to the 90th percentile of full-time salaried workers nationally in that year, presently estimated to be $147,524.

Thus, in most instances salaried employees who currently earn more than $134,004 a year are not required to be paid overtime.

Exempt Salaried Employees

The new rules do not make any changes to the “duties test” that determines whether white collar salaried workers earning more than the initial salary threshold, but less than the HCE compensation threshold, are ineligible for overtime pay. All employees in this salary range who are properly classified as executive, administrative or professional workers (for example, doctors, teachers and lawyers) are exempt from the overtime pay requirements. Certain computer professionals and outside sales employees are also exempt. Those who are not in these categories are entitled to overtime pay even if they earn more than the initial threshold amount, so long as they do not fall into the HCE category.

Summary

Salary Level

New Rules

Hourly workers

Overtime pay required

Less than $913 weekly salary ($47,476 per year)

Overtime pay required

Between $913 weekly salary ($47,476 per year)
and $134,004 yearly salary

Overtime pay required , except executive, administrative and professional employees

Over $134,004 yearly salary (HCE)

Generally not required to be paid overtime