The Department of Labor (DOL) issued a final overtime rule for executive, administrative and professional employees on September 24, raising the salary threshold for exempt employees to $684 per week ($35,568 annually) from $455 per week ($23,660 annually). This final rule will go into effect on January 1, 2020.
In a significant win for the industry, DOL is not changing the duties test that govern when overtime must be paid. In similarly good news, as NMHC and NAA requested, DOL is also not proposing to make automatic adjustments to the threshold. NMHC and NAA had supported the proposed rule’s requirement that the threshold be reviewed every four years pursuant to a notice and comment period. However, DOL is instead intending to propose updating this on a more regular basis than it has in the past. Finally, to recognize current pay practices, DOL’s final rule allows employers to count non-discretionary bonuses to satisfy up to 10 percent of the threshold.
The Labor Department reassessed overtime pay thresholds after a Federal District Court overturned an Obama Administration rule that sought to raise the threshold to $47,476 in 2017.
In the past, NMHC and NAA called on DOL to adjust the threshold for inflation as it was set in 2004. While this would have resulted in a slightly lower threshold than the one in the final rule, the apartment industry does not oppose DOL’s final rule in light of an Obama Administration proposal that would have raised the threshold to $47,476.
Notably, the DOL’s final rule specifically cites NMHC and NAA’s opposition to the Obama-era overtime rule. The apartment industry opposed the Obama-era rule because it would have harmed the ability of multifamily employers to implement, and their employees to take advantage of, flexible scheduling options. The industry also contended that the Obama Administration’s final rule would have demoted many employees from salary to hourly pay, harming employee morale. It would also have limited career advancement opportunities for employees. Those nearing 40 hours of work in a week may not have been able to participate in training or other opportunities because the employer would be unable to provide overtime compensation for the hours spent. The new overtime threshold of $35,568 should mitigate these concerns.