Trump administration expands overtime pay eligibility

The Trump administration has issued a rule that will make overtime pay available to 1.3 million additional workers, though the proposal replaces a more generous one advanced by former President Barack Obama.

The Labor Department said Tuesday that it is raising the salary level that companies will have to pay to exempt workers from overtime to $35,568 a year, up from $23,660. Americans earning less than that amount will typically be paid time and a half for any work over 40 hours a week.

The new rule takes effect on Jan. 1.

Two employment law attorneys in Baltimore said the changes will not have a profound effect across the board in Maryland but will have an impact in certain sectors.

Eric Hemmendinger, a partner at Baltimore-based Shawe Rosenthal, said the changes will come into play for employees in retail, service and other sectors who are earning close to the new threshold, such as an assistant manager or a janitorial supervisor, particularly in rural areas.

“I doubt it’s going to have a huge impact” in Maryland, he noted.

In guidance sent out to clients, Shawe Rosenthal noted that the existing duties tests for administrative, executive and professional exemptions remain in place.

The new rule will benefit retail, fast-food restaurant, and home health care workers, as well as other lower-paid workers. Many employees in those industries have been paid just above the $23,660 threshold, which has been in place since 2004, and then required to work overtime without extra pay.

Many worker rights’ group and left-of-center economists criticized the move, however, for covering far fewer workers than an earlier proposal issued by the Obama administration in 2015.

Under Obama, the Labor Department proposed raising the threshold to more than $47,000, which would have made nearly 5 million more workers eligible for overtime. That rule, however, was struck down in court after being challenged by states and business groups.

The threshold hasn’t been increased since 2004.

The Obama proposal contained a provision that would have adjusted the threshold amount for overtime eligibility every three years to take inflation into account. The Trump administration’s rule does not contain such a provision, noted Melissa Calhoon Jones, chair of the employment and labor law group at Tydings & Rosenberg.

The new rule “is much more employer-friendly” compared to the Obama proposal, Jones said.

In the 1970s, more than 60% of workers were eligible for overtime pay, said Heidi Shierholz, an economist at the left-leaning Economic Policy Institute. That figure fell to just 7% in 2016.

The U.S. Chamber of Commerce praised the Trump administration’s rule, arguing that it provides more flexibility for employers in managing their staffs.

“The new overtime salary threshold is a balanced and responsible update to the standard that has been in place for 15 years,” said Marc Freedman, vice president of workplace policy at the chamber.

Jones said employers should examine their workforce to see if it makes sense to bump an employee’s pay beyond the new threshold if that worker is likely to accrue significant overtime under the new law.

At the same time, she said, it makes sense for companies to examine the job duties and responsibilities for each position to make sure they meet the tests for exemptions from overtime rules.

“It’s a good idea for employers to periodically go back and review, because jobs change over time,” she noted, particularly with the onset of new technologies in the workplace.

Hemmendinger said that the new threshold – which translates to $684 a week or the hourly equivalent of $17.10 an hour – is not much higher than the minimum wages that apply now in some metropolitan areas, such as New York and Washington. Maryland is on course to raise its minimum wage to $15 in the next few years.

Compared to most other states, Maryland also has a well-paid workforce; most employees are already above the overtime threshold. The state’s average salary is more than $57,000, according to state data.

The Trump administration rules also allow allowing employers to use annual nondiscretionary bonuses and incentive payments, including commissions, to satisfy up to 10 percent of the standard salary level.

Christopher Rugaber of The Associated Press contributed to this story.