The U.S. Department of Labor has set a new rule that will extend overtime pay to 1.3 million American workers starting on Jan. 1, 2020. It is the first such change in 15 years under the Fair Labor Standards Act.
Under the new rule, workers who earn less than $35,568 per year will be eligible for overtime pay of time-and-a-half. The current threshold for so-called “exempt” workers is $23,700 set in 2004. Prior to that change, the limit was $8,060 for nearly 30 years.
New threshold replaces Obama-era decision
The Obama administration tried to raise the exempt employee threshold to $47,000 in 2016, which would have extended overtime pay to 4 million American workers. However, a federal judge in Texas blocked that decision saying the level was too high.
The Labor Department’s Wage and Hour Division says the new threshold is a “thoughtful” compromise reached after reviewing listening sessions, public comment and realistic calculations. The Division says businesses must now prepare to comply with the rule by the first of the year.
What businesses will be most impacted?
Some analysts say the new threshold is a significant victory for employers compared to the Obama-era rule, which could have hiked payrolls by as much as 33%. Experts say manufacturing and retail companies will be the most impacted businesses as their employees typically make less than $35,568 a year.
Employers in Georgia who pay at or near minimum wage may also be affected. The state’s minimum wage is currently $5.15 an hour, but most workers fall under the federal minimum wage of $7.25. Employers whose workers sit under the threshold will likely face a decision whether to give them a pay raise, so they remain exempt, or pay them overtime.