Labor Department Lifts Overtime Pay Threshold

The final rule extends coverage to 1.3 million more U.S. workers.

September 25, 2019

WASHINGTON—Yesterday, the U.S. Department of Labor issued its final overtime rule, making 1.3 million additional American employees eligible for overtime pay under the Fair Labor Standards Act (FLSA). When the final rule takes effect on Jan. 1, 2020, the threshold for time-and-a-half pay will increase to $35,568 from $23,660, a level set in 2004.

On average, the convenience and fuel retailing industry already pays store managers more than the federal minimum threshold for overtime pay. The average salary for c-store managers is $45,179, according to NACS State of the Industry Compensation Report of 2018 Data. The increased salary threshold likely will be felt at the assistant manager level, where the average salary is $29,533.

“For the first time in over 15 years, America’s workers will have an update to overtime regulations that will put overtime pay into the pockets of more than a million working Americans,” said Acting U.S. Secretary of Labor Patrick Pizzella in a press release. “This rule brings a commonsense approach that offers consistency and certainty for employers as well as clarity and prosperity for American workers.”

The final rule updates the earnings thresholds necessary to exempt executive, administrative or professional employees from the FLSA’s minimum wage and overtime pay requirements, and it allows employers to count a portion of certain bonuses/commissions toward meeting the salary level. The new thresholds account for growth in employee earnings since the currently enforced thresholds were set in 2004. In the final rule, the department is:

  • Raising the “standard salary level” from the currently enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker);
  • Raising the total annual compensation level for “highly compensated employees (HCE)” from the currently-enforced level of $100,000 to $107,432 per year;
  • Allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices; and
  • Revising the special salary levels for workers in U.S. territories and in the motion picture industry.

“[The] rule is the thoughtful product informed by public comment, listening sessions, and long-standing calculations,” said Cheryl Stanton, Wage and Hour Division administrator.

“NACS welcomes the Department of Labor’s announcement of its final overtime rule,” said Jon Taets, NACS director, Government Relations. “Much of the final rule released yesterday reflects the comments that NACS filed with the Labor Department both in 2015 and, more recently, this summer. By sticking to the traditional methodology for calculating the salary threshold, the department has proposed a much more reasonable standard than that which was finalized back in 2016 before being invalidated by a federal court,” Taets said. “While legal challenges to the new rule are possible, we recommend that all convenience retail operators immediately begin reviewing their payroll systems to ensure that they will be in compliance with the new overtime rule on January 1 of next year.”

As reported in NACS Daily, the Labor Department released its proposal to update the overtime rule in March. California, New York, Pennsylvania  and Washington are among the states which have already made moves to change the salary level requirements for overtime pay or are weighing such moves.