Earlier this year, the Department of Labor (DOL) issued a final ruling that increased the salary threshold at which workers are eligible to receive overtime compensation. According to the DOL, this change has the potential to impact more than 1 million Americans.
As the year comes to an end, it is vital to take a few minutes to understand the new rule and what you may need to do to ensure compliance.
As a refresher, the FLSA classifies jobs as either “exempt” or “nonexempt.” Nonexempt employees are entitled to receive overtime pay, while exempt employees are not. It is a fair assumption that most American workers are classified as nonexempt. To be classified as exempt, the DOL established criteria that includes both a “duties test” and minimum salary requirement. And while the “duties test” remains unchanged, new DOL ruling increased the minimum salary requirement for the first time since 2004.
Here is what you need to know:
Currently classified exempt employees will need to be reclassified as nonexempt if they:
- earns less than $684 per week or $35,568 per year, or
- the “highly compensated” employee earns less than $107,432 annually.
Also, noteworthy, in recognition of evolving pay practices, a portion (up to 10%) of supplemental pay, including non-discretionary bonuses and other incentive compensation, may be included in the calculation of the new pay level.
This new DOL rule takes effect on January 1, 2020. We recommend that employers begin reviewing employee job classifications along with their current weekly pay. And although it may seem straightforward, often a job review can lead to more questions than answers.
HR Advantage Group is here to help, answer questions, and provide guidance on the impact this new ruling may have on your organization.
Fact sheet on the “duties” test: https://www.dol.gov/whd/overtime/fs17a_overview.htm
Summary of changes for 2020: https://www.dol.gov/whd/overtime2019/
This content is intended as a general educational and informational resource only. It may not be used or relied upon as legal advice.HR Advantage Group, LLC makes no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the content of this or any other content. Any reliance you place on such information is therefore strictly at your own risk. In no event will we be liable for any loss or damage in connection with the use of this content, or supplemental information.