Overtime threshold increases, but impact likely smaller in Md.

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The federal Department of Labor’s new overtime rule will likely not have a significant effect on Maryland businesses after most prepared for a more stringent rule proposed by the Obama administration, local employment law specialists say.

The rule takes effect with the new year and raises the salary level that companies will have to pay to exempt workers from overtime to $35,568 a year, up from $23,660. 

The rule replaces one proposed by the Obama administration that would have raised the threshold to around $47,000. A federal judge blocked that rule in 2016, just days before it would have taken effect.

Unlike the Obama rule, the threshold under the new rule will not be adjusted for inflation. The threshold was last changed in 2004.

Requirements that employees exempted from overtime rules must have managerial duties and must be paid on a salary basis have not changed.

The new rule will likely affect more than 1 million workers. More than 4 million would have been affected by the Obama rule.

Employees who receive commissions and bonuses can also be paid 90% of the threshold, with the expectation that the rest would be made up with those extra pay benefits. If it is not, employers can make it up with a lump sum payment.

For two reasons, Maryland employment law attorneys say, the new rule is unlikely to significantly affect Maryland businesses.

First, most businesses prepared for the higher Obama threshold and already meet the threshold under the new rule. 

“A lot of employers, in preparation for the Obama rule, had already raised the salaries of a lot of their white-collar workers,” said Julie Janofsky, an attorney with Fedder & Janofsky LLC. “Those that did would likely already be in compliance with this rule.”

Some employers may still not have come into compliance with the new rule. 

Melissa Calhoon Jones, chair of the employment and labor law group at Tydings & Rosenberg,  recommends that employers take stock of who could be eligible for overtime pay under the new rule.

“What employers would be doing if they are on the line is looking at their employees who they consider to be exempt and see who would fall below the line and who would still be considered exempt from a salary perspective,” she said. 

For those that have not met the threshold, the solution is a fairly math problem. If employees works enough overtime that their pay would regularly rise above the threshold, bump their salary to around $36,000.

But in Maryland, that is the second reason the rule’s impact will be limited. Most workers in the state make more than the $35,568 threshold — about $684 a week. Maryland’s average salary is a little more than $57,000 a year, according to state data.

Overall, Janofsky said she could think of few clients she needed to review the new rule with because most would have already been in compliance.

Businesses that may be affected could include nonprofits, said Jones, who also said that most of her clients had already been in compliance with the new rule.

Maryland’s rising minimum wage could also affect how many people are eligible for the overtime pay threshold into the future. By 2025, most businesses in the state will have to pay employees at least $15 an hour. Under the new overtime rule, that is just $2 an hour less than the threshold.