The federal government has spent the last several years trying to expand overtime rules for American workers.
Under the Obama administration in 2014 there was attempt to double the threshold, but it was ultimately blocked by a federal judge.
But in late September of this year, the Department of Labor released their final rule
that makes some important updates to overtime pay in the United States under the Fair Labor Standards Act (FLSA).
And these new rules take effect January 1, 2020, leaving employers with only a few months to get ready.
New Overtime Rules Raise the Federal Salary Threshold
On September 24th
, the Department of Labor announced the new rules for overtime pay in the United States
Now, employees who make less than $684 per week, federally, (which equates to $35,568 per year
for the “standard salary level”) will be eligible for overtime pay if they work more than 40 hours a week, unless they meet certain exemption criteria.
If workers are paid less than this threshold or do not meet the necessary tests, they must be paid 1.5 times their regular hourly pay rate for each hour worked after 40 hours in a workweek.
This salary cut-off increase is expected to provide overtime pay to an additional 1.3 million Americans.
According to the DOL, “The final rule updates the earnings thresholds necessary to exempt executive, administrative, or professional employees from the FLSA's minimum wage and overtime pay requirements and allows employers to count a portion of certain bonuses (and commissions) towards meeting the salary level. The new thresholds account for growth in employee earnings since the currently enforced thresholds were set in 2004.”
What Does the New Overtime Rule Mean for Employers?
In addition to the standard salary level, the total annual compensation level for highly compensated employees has been increased from $100,000 to $107,432.
Employers will be required to reclassify currently exempt workers to nonexempt status if their earnings fall in the new threshold.
Additionally, it’s also expected that employers will raise the pay of some workers in order to get above the new limit.
An important note for employers to know is that nondiscretionary bonuses and incentive payments such as commissions that are paid on an annual (or more frequent) basis can be counted for up to 10% of an employee’s salary level.
Business leaders will need to be ready for when the law takes effect on January 1st
to stay in compliance and avoid potential fines and penalties
Training may be required
for HR professionals, business leaders, managers, or anyone else who is involved on the FLSA classification of employees.
It is also recommended to assess the salary levels of employees at both the “standard salary level” and “highly compensated employee” thresholds.
Owners can also seek the assistance of experienced HR compliance professionals
who can help employers be ready for the new rules and ensure compliance when they take effect.
Lastly, employers should also know that state minimum salary requirements may be higher than the newly set federal level
. If an employer is in a state where the minimum salary requirements are greater than the federal level, then employers will need to comply with the state law.
Employers Must Be in Compliance by January 1, 2020
Employers only have a few months to get ready for the DOL updates to the country’s overtime rules
and maintain compliance. Owners will also need to keep up with future overtime news as the DOL said they intend on updating salary thresholds more frequently moving forward.
Employers need to always stay up-to-date on all employment-related legislation that may be coming at the federal, state, or local levels as more updates and laws are expected to be coming as we move into 2020.
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