November 05, 2019

Overtime Final Rule

The Overtime Final Rule, effective January 1, 2020, increases the eligibility for overtime for 1.3 million more workers. The final rule adjusts the salary level test for determining when white-collar workers are exempt for overtime pay.

According the the National Council of Nonprofits, the Overtime Final Rule does three things of significance to charitable nonprofits:

1. Updates the standard minimum level for salaried workers, raising it from $455 per week ($23,660 per year) to $684 per week, or $35,568 per year. The Department has retained the existing methodology for setting the level, using the 20th percentile of earnings of fulltime salaried workers in the lowest-wage census region (the South) and in the retail sector. As a result of the adjustment, the new level is 50 percent higher than the current level that was last updated in 2004. The new level is only half as much as the increase (to $955/week; $47,476/year) approved by the Obama administration in 2016, but that was blocked by a federal court.

2. Raises the salary minimum for highly compensated employees (HCE) from $100,000 a year to $107,432 annually, of which $684 must be paid weekly on a salary or fee basis. The new minimum is set at the annualized value of the 80th percentile of weekly earnings of full-time salaried workers. This is lower than the 90th percentile methodology initially proposed earlier this year.

3. Permits employers to treat nondiscretionary bonuses and incentive payments (including commissions) paid on an annual or more frequent basis to satisfy up to 10 percent of the standard salary level. The Obama Administration had also adopted this change.

The Overtime Final Rule goes into effect on January 1, 2020 and there is no phase-in period or exceptions for nonprofits. 

Listen to UNA CEO, Kate Rubalcava, speak with Sarah Schweinsberg on WORLD Radio, a daily news podcast, about how the Overtime Final Rule may affect nonprofit organizations: Expanding Overtime Pay

For more information on the Overtime Final Rule please visit:
U.S. Department of Labor Final Rule: Overtime Update
National Council of Nonprofits Analysis: Understanding the New Overtime Final Rule
National Council of Nonprofits Overtime Final Rule Resource Page