Updated Overtime Pay Rules Go Into Effect On January 1, 2020
The United States Department of Labor, Wage and Hour Division, has been analyzing and taking comments about potential changes to the amount of salary necessary for an employee to be considered exempt. Whether an employee makes enough money in salary is one of the factors considered in determining whether an employee should be exempt from the overtime pay requirements imposed by the Fair Labor Standards Act (“FLSA”). announced significant changes to the laws governing the payment of overtime wages. The DOL expects the change in the law will make approximately 1.3 million American workers eligible to receive overtime pay. The DOL summarized the changes in the salary basis under the FLSA for exempt employees as follows:
- raising the “standard salary level” from the currently enforced level of $455 per week to $684 per week (equivalent to $35,568 per year for a full-year worker);
- raising the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year;
- allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices; and
- revising the special salary levels for workers in U.S. territories and the motion picture industry.
Employers now have a little over two months to prepare for these changes to the FLSA’s salary basis test. Employers need to review the salaries paid to their employees and, for those employees who will make at least the $684/week ($35,568/year) threshold(s) and who do not qualify for some other exemption, they may need to convert those who earn less than these amounts to be paid hourly. Employers must now be careful to make sure that employees who would otherwise qualify for an exemption but make less than $684/week ($35,568/year) to ensure that these employees are paid time and one-half overtime pay for all hours worked in a week beyond 40 hours.