It’s back. And it’s finalized.
Employees who make less than $35,568 are now eligible for overtime pay under a final rule issued today (9/24/19) by the U.S. Department of Labor (DOL). The new rate will take effect Jan. 1, 2020.
To be exempt from overtime under the federal Fair Labor Standards Act, employees must be paid a salary of at least the threshold amount and meet certain duties tests. If they are paid less or do not meet the tests, they must be paid 1 1/2 times their regular hourly rate for hours worked in excess of 40 in a workweek.
The new rule will raise the salary threshold to $684 a week ($35,568 annualized) from $455 a week ($23,660 annualized).
Under the new rule, nondiscretionary bonuses and incentive payments (including commissions) paid on an annual or more frequent basis may be used to satisfy up to 10 percent of the standard salary level.
In addition to raising the salary cutoff for exempt workers, the new rule raises the threshold for highly compensated employees from $100,000 a year to $107,432 (of which $684 must be paid weekly on a salary or fee basis).
What Should Employers Do Now?
- Review your active employee census and determine if those that are currently exempt meet the new salary requirements.
- Determine which employees do not currently meet the salary threshold.
- Create a plan to adjust status to ensure your employee classifications are FLSA compliant.
- Create a plan of communication to affected employees (remember, many employees look as exempt classification as a higher “status” within the organization. It’s critical that this is communicated to them in a way that does not unnecessarily reduce morale.)
When you are evaluating your approach to adjusting exempt status, there are a variety of things to consider…
- Will this affect PTO status?
- Will this affect benefits status?
- If an exempt employee is now exempt, do I need to ask them to return company equipment (cell phone, etc)?
- How do we manage workload?
- Is there discrimination risk with our strategy?
Note: Job titles do NOT determine exempt status. In order to qualify as exempt, the job duties and salary requirements must both be met. The job duties test varies and has not had any announced changes.
If you feel that you are not ready for 1/1/20 or have questions, Sabeza HR is here to help. Email [email protected] or call 843-691-9092.