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February 11, 2020


The Labor Department rules went into effect January 1, raising the overtime exemption threshold to $684/week or $35,568/year, a 50 percent increase from the previous threshold of $455/week or $23,660/year. Manufacturing companies, retailers, shift supervisors and assistant managers of restaurants are most likely to be impacted by the new rules. Companies of all sizes will feel the effects, but small businesses will be hit particularly hard because they don't have the revenue stream of larger businesses.

The new rules are no surprise to most companies, employers have had plenty of time to prepare for the rule change after the idea was first proposed by the Obama administration in 2016. The original proposal would have affected 4.2 million people and nearly doubled the threshold to $47,476 before being revised by the Trump administration. The new rules also allow employers to apply contractual bonuses and commission payments to as much as 10 percent of the exemption threshold, effectively lowering the amount of regular pay needed to reach it.

Many employers are expected to pay workers overtime, but those that are not, are taking steps to limit the strain on staffing budgets. One strategy is to give employees a raise to put them over the threshold, exempting them from overtime pay, or to ensure employees are not working over 8 hours per shift.

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