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In a recent announcement, the U.S. Department of Labor has announced a final rule update for 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) toward meeting the salary level. The changes go into effect on January 1, 2020.
The standard salary level of $455 per week has now been raised to $684 per week, which is $35,568 for a full year. This means that employees who earn less than $35,568 a year must now receive overtime pay whenever their workweek exceeds 40 hours. The current salary ceiling has been $23,660 since 2004. In addition, the annual compensation requirement for the “highly compensated employee” exemption has been raised from $100,000 per year to $107,432 per year.
What needs to be done now?
To begin with, check your employees’ salary levels against the new thresholds. It may be advisable to give raises to employees who fall just under a threshold and routinely work more than 40 hours per week. Or you might want to redistribute workloads or scheduled hours to prevent newly nonexempt employees from working overtime.
This also is a good time to review your employees’ job duties against the tests for the various exemptions. You should check duties on a regular basis, as this is a ripe area of litigation for employees who contend that they deserve overtime despite their job titles. Courts and the DOL agree that actual duties, not job title or even job description, are what matters.
If you will be reclassifying currently exempt workers as nonexempt, you must establish procedures for accurately tracking their time to ensure proper overtime compensation is paid. Reclassified employees may require some training on timekeeping procedures. They also might need some reassurance that they are not being demoted.
Some employers may find that the new overtime rule substantially increases their compensation costs, including their payroll tax liability. To find out how this ruling may impact you and your business, contact a member of your DGC client service team or Dawn Hagman, SPHR, SHRM-SCP at 781-937-5345 / email@example.com.
Click here to read the initial release from the Department of Labor.