Department of Labor Heeds NAHB Concerns in Raising Overtime Threshold

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In a victory for NAHB, the U.S. Department of Labor heeded our concerns when issuing a final rule that will raise the overtime salary limit from $455 per week to $684 per week, which is equivalent to $35,568 per year for a full-year worker. This means that any professional, administrative and executive employees making less than $35,568 would be due time and a half if they work more than 40 hours a week. The overtime threshold was last raised in 2004 and the Labor Department said the final rule will make 1.3 million American workers eligible for overtime pay under the Fair Labor Standards Act. In crafting the final rule, the Labor Department acknowledged NAHB’s views by quoting an excerpt from NAHB’s comments: “By continuing its current practice of engaging the regulated community . . . [the Labor Department] will receive timely and important information as it moves forward with proposed updates in the future.” During the Obama administration, NAHB was successful in defeating the 2016 Obama-era rule, a much more onerous proposal that would have raised the overtime threshold to $47,476. Such a drastic jump would have resulted in real hardship for the nation’s small business community. NAHB was also concerned with the Labor Department's proposal to implement automatic salary updates going forward. NAHB joined other business groups in filing a lawsuit challenging that rule. As a result, a federal court first issued a nationwide preliminary injunction against the rule and, ultimately, a decision invalidating the final rule. The Labor Department appealed that decision, but it is currently stayed pending this most recent rulemaking. In the current final rule, the Labor Department rejected requests to implement an automatic update process for future salary thresholds and declined to set a fixed schedule for review. NAHB had argued in its 2019 comments that the Labor Department should retain the notice-and-comment rulemaking process when setting future salary thresholds and the agency noted our concerns on this point. The final rule also:
  • Leaves untouched the standard duties tests for determining whether a worker would be subject to overtime;
  • Raises the total annual compensation level for “highly compensated employees” from the currently enforced level of $100,000 to $107,432 per year;
  • Allows 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
  • Revises the special salary levels for workers in U.S. territories and in the motion picture industry.
The final rule will be effective on Jan. 1, 2020. More information about the final rule is available here. For questions, contact Felicia Watson at 800-368-5242 x8229.

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