There has been a great deal of confusion surrounding the federal overtime regulations, with millions of workers and business owners alike wondering if the law is going to cause any changes to paychecks.
In short, the current federal salary threshold to qualify for overtime is $23,660 ($455 per week) if employees work more than 40 hours per week. The proposed increase to the salary threshold is $35,308 ($679 per week), but it is still only a proposal—and not actually raised yet—after the Obama administration tried to raise it to $47,500 ($913 per week) but was halted by federal courts. However, while the federal overtime rules are currently not changing from this $23,660 cap that was last updated in 2004, there are six states that are also proposing their own changes to their overtime pay laws (or are already putting them into effect).
New York
The threshold increase went into effect on December 31, 2018, with gradual increases as a result of the new minimum wage law. Overtime rules vary depending on the location and size of the business, with New York City employers with 11 or more employees being required to pay overtime to employees who make up to $1,125 per week ($58,500 annually).
If the business has 10 or fewer employees, this threshold doesn't kick in until December 31, 2019, but is currently $1,012.50 per week ($52,650 annually).
Nassau, Suffolk and Westchester counties regardless of employer size:
All other counties in New York state regardless of employer size:
New York also has no minimum salary for the "professional" exemption, except for the current federal statute.
Pennsylvania
The current federal overtime threshold still applies in Pennsylvania.
Governor Tom Wolf has proposed the following overtime threshold increase at the state level:
The governor is also proposing new tests for the executive, administrative, and professional exemptions to cover more employees.
Maine
Maine's current overtime threshold is $33,000 annually for salaried workers.
A bill is being proposed in Maine’s House of Representatives to raise the threshold to $55,000 by 2022.
Washington
The current federal overtime threshold still applies in Washington, with the state's threshold being only $13,000 having not been updated since 1976.
There are currently hearings being held over a proposed ruling to raise the threshold to $35,000 annually ($675 per week) by July 1, 2020, if the employer has 50 or fewer employees while the cap would be $49,000 with more than 50 employees. The rule proposes that all employees within Washington state will qualify for overtime by 2026 if they earn $1,536 per week, or $80,000 annually, or less.
California
California is currently unaffected by the proposed federal changes since the current threshold of $45,760 per year for employers with 25 or fewer employees or $49,920 per year if there are 26 or more employees.
The proposed threshold will increase to $62,400 annually.
Massachusetts
The current federal overtime threshold still applies in Massachusetts. The proposed bill in the state is aiming to increase the threshold to $64,000 and increase protections for salaried workers.
If you employ people in the above states or are planning to relocate your business there, it's a good idea to watch over these proposals and be mindful of the states and counties where they already apply. Additionally, all business owners should keep an eye out for any federal overtime pay regulation changes that could pass in the near future.
Frank Jenkins, CPA writes for CountingWorks, an accounting news and advice website. Reach him at [email protected].
About Frank Jenkins Jr
Frank Jenkins Jr. CPA is the managing partner of Adams, Jenkins & Cheatham, a CPA practice based in Midlothian, VA. Frank specializes in Consulting services, tax planning, audit & assurances. "I genuinely care about our clients because I have a personal connection with them." He is active in the community and belongs to the AICPA and the VSCPA.
