If you haven’t started planning for it yet you need to know that the new threshold for those eligible for overtime takes effect January 1, 2020. The current threshold is $23,660 per year or $455 per week. That amount hasn’t changed since 2004. It includes bonuses but excludes most fringe benefits. The Trump administration has proposed increasing the threshold to $35,308 effective January 1, 2020.
The law uses a three-part test to determine if a person is eligible for overtime. First, that person must not perform executive, administrative or professional duties. For example, lawyers, doctors and pastors would not be subject to overtime. Paralegals and secretaries would usually be eligible for payment of overtime at 1 ½ times their normal rate.
Second, they must be paid a salary. Workers who are paid hourly are automatically eligible for overtime pay.
Finally, they must be paid less than the threshold.
In order to qualify for overtime pay the worker must pass all three tests. Some cases may be close calls especially if their duties are partly professional and partly not.
How should you respond? There is been very little discussion of the proposed change, so it is almost certain to go into effect. You should immediately start to review current pay and worker classifications to make sure that you have them properly classified as eligible for overtime or not. This is a booming area for litigation so be conservative in your evaluation. Finally, you need to determine how the proposed change will affect your budget.
