workers punch cards and time clock

The issue

The Trump administration has settled on the final version of regulations that will expand the number of workers eligible to receive overtime under federal law, splitting the difference between a controversial plan offered three years ago by former President Obama and rules that have been on the books for the past 15 years.

Under the regulations issued by the Labor Department in September, most employees making up to $35,568 per year will automatically receive overtime when working more than 40 hours a week. That’s up from $23,660 set in 2004 but only half the increase that would have been seen under Obama’s level of $47,476.

Workers who make more could still be eligible for overtime depending on their job duties, the same as under current regulations. But there is no change in which job duties qualify or exempt a worker for overtime. The threshold for “highly compensated” employees, who do not receive overtime regardless of duties, will be increased to $107,432 from the current $100,000.

Bonuses, commissions and other incentive pay will be allowed to count toward up to 10 percent of the pay levels. In the future, wage levels for overtime eligibility will be updated “more regularly” but the regulations do not include automatic increases, which NRF has opposed.

The new rules take effect January 1, 2020, and are will make an additional 1.3 million workers eligible for overtime.

NRF called the new regulations “a reasonable, thoughtful approach” that “brings overtime eligibility up to speed with today’s economy” and provides “regulatory certainty for American retailers while promoting upward mobility and workplace flexibility for workers.”

By contrast, NRF had believed that the wage level set by the Obama administration was too high and argued that any new level set under Trump should be lower and account for regional and industry differences.

The Obama overtime expansion plan was approved and set to take effect in December 2016, but a federal judge issued an injunction against the expansion before that could happen. The judge agreed with NRF and other groups that argued in a lawsuit over the regulations that DOL had overstepped its authority. NRF opposed the regulations because of their impact on career opportunities and because they would have reversed progress seen since the 2004 update, which eliminated vague language that had caused extensive litigation over disputed overtime.

After President Trump took office in 2017, DOL withdrew the Obama rules and asked for input so it could consider issuing a more realistic version that would be better for employers and workers alike. The new regulations were developed after the Trump Labor Department held six hearings across the country and received over 200,000 comments from businesses and other interested parties.

Why it matters to retailers

working late at desk with laptop

Under the wage level proposed under Obama, overtime would have been mandated for many retail store managers and assistant managers, taking away their ability to use their own discretion in deciding whether to put in the extra hours sometimes needed to do their jobs. Retailers were concerned that putting managers under overtime rules would undermine their status as career professionals rather than hourly workers.

survey of retail managers conducted for NRF found the majority opposed overtime expansion, with 75 percent saying it would diminish the effectiveness of training and hinder their ability to lead by example. Another NRF study found expanded overtime would drive up retailers’ payroll costs while limiting workers’ opportunities to move up into management. Many employers would be forced to limit hours or reduce base pay to compensate, meaning most workers would be unlikely to see an increase in take-home pay, the study said.

NRF advocates against overtime expansion

NRF told DOL during review of the Obama regulations that overtime expansion would have been a “step back” for career-track workers. NRF believed the $47,467 level was too high, and that the plan would have limited career opportunities by “turning managers into rank-and-file hourly workers.” NRF later filed suit against the regulations, a move that was successful in keeping them from taking effect until after the election, when they were ultimately set aside by the Trump Labor Department.