October 2019 Government Update

DOL Releases New Overtime Rule

Recently, the U.S. Department of Labor (DOL) released a new rule regarding overtime pay for salaried workers.  The new rule, which goes into effect on January 1, 2020, raises the salary level defining employee eligibility for overtime pay from $23,700 to $35,568.  Employees below this level are automatically considered eligible for overtime pay.  Employees that earn more than this amount, and who perform duties that are “executive, administrative or professional” are not eligible for overtime pay.  

Key Provisions of the Final Rule

The final rule updates the salary and compensation levels needed for workers to be exempt in the final rule:

1. raising the “standard salary level” from the currently enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker);
2. raising the total annual compensation level for “highly compensated employees (HCEs)” from the currently-enforced level of $100,000 to $107,432 per year;
3. allowing 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
4. revising the special salary levels for workers in U.S. territories and in the motion picture industry.

Additionally, the DOL intends to update the standard salary and HCEs total annual compensation levels more regularly in the future through notice-and-comment rulemaking.

Standard Salary Level

The DOL is setting the standard salary level at $684 per week ($35,568 for a full-year worker). The salary amount accounts for wage growth since the 2004 rulemaking by using the most current data available at the time the DOL drafted the final rule. The DOL is updating the standard salary level set in 2004 by applying to current data the same method and long-standing calculations used to set that level in 2004—i.e., by looking at the 20th percentile of earnings of full-time, salaried workers in the lowest-wage census region (then and now the South), and/or in the retail sector nationwide.

HCE Total Annual Compensation Requirement

The DOL is setting the total annual compensation requirement for HCEs at $107,432 per year. This compensation level equals the earnings of the 80th percentile of full-time salaried workers nationally. To be exempt as an HCE, an employee must also receive at least the new standard salary amount of $684 per week on a salary or fee basis (without regard to the payment of nondiscretionary bonuses and incentive payments).

Special Salary Levels for Employees in U.S. Territories and Special Base Rate for the Motion Picture Producing Industry

The DOL is maintaining a special salary level of $380 per week for American Samoa because minimum wage rates there have remained lower than the federal minimum wage. Additionally, the DOL is setting a special salary level of $455 per week for employees in Puerto Rico, the U.S. Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands.

The DOL also is maintaining a special “base rate” threshold for employees in the motion picture producing industry. Consistent with prior rulemakings, the DOL is increasing the required base rate proportionally to the increase in the standard salary level test, resulting in a new base rate of $1,043 per week (or a proportionate amount based on the number of days worked).

Treatment of Nondiscretionary Bonuses and Incentive Payments

In the final rule, in recognition of evolving pay practices, the DOL also permits employers to use nondiscretionary bonuses and incentive payments to satisfy up to 10% of the standard salary level. For employers to credit nondiscretionary bonuses and incentive payments toward a portion of the standard salary level test, they must make such payments on an annual or more frequent basis.

If an employee does not earn enough in nondiscretionary bonus or incentive payments in a given year (52-week period) to retain his or her exempt status, the DOL permits the employer to make a “catch-up” payment within one pay period of the end of the 52-week period. This payment may be up to 10% of the total standard salary level for the preceding 52-week period. Any such catch-up payment will count only toward the prior year’s salary amount and not toward the salary amount in the year in which it is paid.

For a compliance guide for the new Overtime Rule, click here. 

BSCAI Grassroots Action Center Launched

Recently, in an effort to boost the association’s advocacy efforts and effectiveness, BSCAI launched a brand new BSCAI Action Center and advocacy guide on the website. These resources are designed to provide members with a higher level of interaction with federal elected officials and get the priorities and needs of the industry front and center.

First, the new BSCAI Action Center is an intuitive grassroots portal and allows members to weigh in on pressing issues with elected officials with just a few clicks. Second, the new advocacy page on the website provides members with information about advocacy, including how to contact elected officials and tips for successfully communicating with them. These resources will continue to grow and evolve as BSCAI takes more action on key issues. For more information, contact Kevin McKenney at kmckenney@bscai.org.

United States Calls Off Chinese Tariff Rate Increase

Last Friday, the Trump administration announced they were calling off the proposed 5% tariff rate increase on $250 billion worth of Chinese goods (Lists 1-3) scheduled for tomorrow. As a result, the 25% tariff rate on these imports remains in effect. This comes after trade officials from the U.S. and China met in Washington, D.C. last week for high-level negotiations regarding the ongoing trade conflict between the two countries.

The president said negotiations went better than expected and that the administration had agreed in principle to a “phase one” trade agreement with China. The president also stated the tentative deal would take another three weeks to write and would be concluded around mid-November. As part of the proposed deal, China would increase limits it has placed on foreign ownership in its financial services sector, enhance certain intellectual property protections and make $40 to $50 billion in new agricultural purchases from U.S. farmers. However, on Monday, Chinese President Xi Jinping announced he wanted further negotiations with the U.S. later this month before he signs the agreement. The United States is still planning to implement a 15% tariff on “List 4B” Chinese imports scheduled for December 15.

Officials involved with the negotiations from both countries say they are still far apart on a comprehensive trade deal but hope a smaller agreement will help re-establish trust between the United States and China. Recently, BSCAI weighed in with the U.S. Trade Representative’s Office (USTR) opposing 25% tariffs on several products from China. For more information, contact Kevin McKenney at kmckenney@bscai.org.