We’ve been following the overtime rule changes since 2016. The changes stalled out for various reasons but the US Department of Labor under the Trump Administration has delivered its new regulations which are effective January 1, 2020.
Some of the key points:
- the minimum base salary for exempt employees moves up from $455 a week to $684 a week ($23,660 annually to $35,568 annually)
- the total annual compensation for “highly compensated employees” increases from $100,000 to $107,432 (annual salary)
- there are no automatic increases to salary levels.
To put it in perspective, the Obama era base salary increase would have been $47,476 as opposed to $35,568 number. Put another way, those that make below the $35k number are entitled to overtime under the Fair Labor Standards Act.
The same suggestions the DOL circulated in 2016 still hold true:
- Raise salary and keep the employee exempt from overtime: Employers may choose to raise the salaries of employees to at or above the salary level to maintain their exempt status, if those employees meet the duties test (that is, the duties are truly those of an executive, administrative or professional employee). This option works for employees who have salaries close to the new salary level and regularly work overtime.
- Pay overtime in addition to the employee’s current salary when necessary: Employers also can continue to pay their newly overtime-eligible employees the same salary, and pay them overtime whenever they work more than 40 hours in a week. This approach works for employees who work 40 hours or fewer in a typical workweek, but have occasional spikes that require overtime for which employers can plan and budget the extra pay during those periods. Remember that there is no requirement to convert employees from salaried to hourly in order to calculate their overtime pay!
- Evaluate and realign hours and staff workload: Employers can ensure that workload distribution, time and staffing levels are all managed appropriately for their white-collar workers who earn below the salary threshold. For example, employers may hire additional workers.
Employers still need to consider state and local laws that impact this issue. Regardless, action is necessary now to avoid collective FLSA overtime exposure beginning in 2020.