BPHR’s Director Lisa Salcido, SPHR, SHRM-SCP provides answers to your pressing HR questions.
Question: I read that a new overtime rule was finalized. What should our company do to prepare?
Answer: On September 24, 2019 the United States Department of Labor announced the final overtime rule that will make 1.3 million workers newly eligible for overtime under the Fair Labor Standards Act (FLSA). The final rule will be effective on January 1, 2020.
The final rule updates the minimum salary requirements for overtime exemptions. The annual salary level for exempt status will increase from $23,660 to $35,568 per year ($455 to $684 per week). The Highly Compensated Employee (HCE) exemption will increase from $100,000 to $107,432 per year and is intended for high paying positions that do not qualify for the exemptions based on job duties.
To prepare, start by identifying employees currently classified as exempt from overtime, and paid less than $684 per week or $35,568 per year. Then decide to either pay newly eligible workers overtime, or increase their pay to meet the new minimums. Employees now eligible for overtime should be reclassified as non-exempt.
The new overtime rule is under federal law but individual state laws must also be considered. Some state laws (New York, California, and soon Washington) have a minimum salary requirement for exempt employees that is higher than the new federal thresholds. The new federal minimums would not affect employers in these states. Other states have their own exemptions and salary levels without reference to the FLSA.
Many employers will likely discover some employees that have been incorrectly classified as exempt. The new overtime rule only applies to professionals in certain positions, including executive, administrative, professional, computer and outside sales employees. However, job title does not determine exemption status. The FLSA’s duties tests should be applied to determine classification.
Remember all employees are eligible for overtime unless you can prove they are exempt by applying the FLSA duties test. Exemption test criteria is one of the most misinterpreted concepts in HR compliance.
Satisfy Compliance, Focus on Strategy
Do not tackle this alone and do not wait until January! There is a lot of room for error with adjusting salaries and re-classifying employees. Reach out to the experts in BPHR for help now. We can assist with classification audits, applying FLSA duties tests, facilitating payroll and time keeping changes and how to communicate these changes to your employees.
Have a question for Lisa? Email her directly.
DISCLAIMER: The material presented on this page is for informational purposes only and does not constitute legal advice or legal opinion.