New Overtime Rules Effective January 1, 2020 - Are You Prepared?

Effective January 1, 2020, all employees who make less than $35,568.00/annually will be eligible for overtime and will be categorically non-exempt employees. 

Currently, the U.S. Department of Labor requires that in order for an employee to be exempt from overtime, they must meet the strict criteria under the Fair Labor Standards Act (FLSA) exemptions:  

1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (“salary basis test”); and

2) the amount of salary paid must meet the minimum specified amount (“salary level test”); and

3) the employee’s job duties must primarily involve executive, administrative or professional duties as defined in the FLSA regulations (“duties test”).

The new overtime rule focuses only on the “salary level” needed for these employees to be exempt from overtime.  

UNDER THE NEW OVERTIME RULE:

  • The salary level increases for exempt employees from $455.00/week to $684.00/week or at least $35,568 a year.
  • 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.
  • The new rule for highly compensated employees would require workers to earn a total annual compensation of at least $107,432.00, up from $100,000.00.
  • No changes to the duties tests.

WHAT EMPLOYERS SHOULD DO NOW:

  • Review employee classifications – Review data of all employees who are below the salary threshold.  Review budgets, determine who should receive salary increases and who needs to be reclassified to a non-exempt employee.
  • Review employee job duties and responsibilities – Meeting the salary threshold is one requirement; take time to review whether employees meet the job duties test (executive, administrative or professional).
  • Develop a communication strategy - Notify employees who are no longer exempt from overtime that they will be required to track hours and overtime.
  • Train supervisors and managers about authorizing and managing overtime for new non-exempt employees. 
  • Train employees about properly tracking hours.
  • Review or draft an effective overtime policy.

For questions about this article, or any other Employment Law related matter, please contact an attorney in our Labor & Employment Law practice group.