Trump Administration Finalizes Overtime Exemption Rule
At the end of September, the U.S. Department of Labor released the final version of its overtime exemption rule, which increased the salary threshold for executive, administrative, and professional employees to $35,568 per year. This means that executive, administrative, and professional employees who earn less than $35,568 annually are entitled to overtime in the event they work more than 40 hours per week.
Before President Obama left office, his administration proposed an overtime rule that would have increased the salary threshold to $47,476. However, the Obama rule was blocked by a federal judge before going into effect, and after President Trump took office, his administration declined to appeal.
The Trump Administration has now promulgated its own rule, setting the threshold at $35,568 per year. The rule also allows employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10% of the salary level. Although the rule increases the threshold from the current and very inadequate threshold of $23,660, which has been in place since 2004, labor advocates argue that the Trump Administration’s number is not high enough to account for the cost of living and make a meaningful difference for low wage full-time workers.
Heidi Shierholz, who was chief economist at the Labor Department under President Obama and is now policy director at the Economic Policy Institute, has determined that “roughly 8.2 million workers who would have benefited from the [Obama] rule will be left behind by the Trump administration’s rule,” and that workers’ wage gains will be $1.4 billion less than under the Obama rule.
The threshold will not increase automatically, as was proposed by the Obama rule. Rather, the current threshold will remain in place unless a new rule is promulgated. The final number will therefore exclude more and more workers from overtime protections as time goes on.
The rule will take effect on January 1, 2020.