workers punch cards and time clock

The issue

Under federal regulations that took effect in 2020, most U.S. workers making up to $35,568 per year now automatically qualify for overtime when working more than 40 hours a week. That’s up from $23,660 under previous regulations that had been in effect since 2004.

Workers who make more can still receive overtime depending on job duties, the same as before, but there is no change in which duties qualify or exempt a worker. The threshold for “highly compensated employees” has been increased to $107,432 annually from the previous level of $100,000. Nondiscretionary bonuses, commissions and other incentives can satisfy up to 10 percent of the standard salary threshold. In the future, wage levels for overtime eligibility will be updated “more regularly” but the regulations do not include automatic increases, which NRF opposes

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Why it matters to retailers

working late at desk with laptop

While the increase in the overtime eligibility level is significant, it is far lower than the $47,476 that was set to take effect in 2016 under former President Barack Obama but was blocked in court by NRF and other business groups.

Under the wage level set by the Obama administration, 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. An NRF study found the plan would have driven up retailers’ payroll costs while limiting workers’ opportunities to move up into management. Many employers would have been forced to limit hours or make other changes to compensation, meaning most workers would have been unlikely to see an increase in take-home pay, the study said.

By contrast, 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.”

NRF advocates against excessive overtime expansion

NRF acknowledged that an overtime update was overdue but believed the level set by the Obama administration was too high and would have limited career opportunities by “turning managers into rank-and-file hourly workers.” NRF opposed the Obama-era increase while it was under review by the Labor Department and joined other business groups in a lawsuit that kept it from taking effect. NRF then successfully encouraged the Trump administration to set a more reasonable level, resulting in the current regulations.