This week, the Labor Department announced that workers earning less than $35,568 a year will be eligible for overtime pay. The new rule takes effect on January 1, 2020 and will impact approximately 1.3 million workers, who will earn time and a half for any work they do over 40 hours per week. ACRA firms should consider how the change will affect their payrolls and budget accordingly for 2020.
This final ruling puts an end to an intense political and legal brawl over how many employees will be eligible for overtime. Since 2004, the threshold for overtime pay has been $23,660 a year. In 2014, the Obama administration tried to include workers earning up to $47,000. That plan would have also tied future raises to the cost of living.
The Obama rule was an effort to raise the salary limit to keep pace with inflation. The $8,060 salary limit set in 1975 was worth approximately $50,440 in 2014. However, when the rule was finalized in December 2016, 21 states immediately sued. A judge invalidated the rule in 2017, on the grounds that such a dramatic change needed congressional approval.