New Overtime Rules for Employers to Adopt Before the New Year
Employers, the long wait is over. You finally have an answer regarding whether the federal overtime regulations are going to be changed. As discussed in previous blog posts Let’s Try This Again: Department of Labor Proposes Salary Increases for White-Collar Exemptions and Once More, With Feeling: Proposed Increase to Minimum Salary for Highly Compensated Employees, in March 2019, the U.S. Department of Labor abandoned its 2016 attempt to increase the salary threshold for exempt employees when it issued a much-anticipated proposed rule. On September 24, 2019, the DOL formally rescinded the 2016 rule and issued its new final overtime rule.
The new rule, taking effect on January 1, 2020, increases the earnings thresholds necessary to exempt executive, administrative, professional, and highly compensated employees from the Fair Labor Standard Act’s overtime pay requirements from the levels that had been set in 2004. Specifically, the new final rule:
- Increases the “standard salary level” from $455 to $684 per week (equivalent to $35,568 per year for a full-year worker);
- Raises the total annual compensation level for “highly compensated employees” from $100,000 to $107,432 per year; and
- Revises the special salary levels for workers in U.S. territories and in the motion picture industry.
And, for the first time, the final rule allows employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level for executive, administrative, and professional employees (not highly compensated employees).
Employers take note, however, that the new final rule does not change the duties portions of the otherwise affected exemptions.
As New Year’s Day will be here before we know it, this is a good time for employers to audit their pay practices to make sure that employees are properly classified, update timekeeping and payroll systems, and train reclassified employees on new processes before the new rule takes effect.