Changes in Overtime Rules for 2020

The Department of Labor has announced its final ruling that will increase the minimum wage for exempt white-collar employees effective January 1, 2020. The fairly large increase accounts for wage growth since the last ruling was set in 2004.

What are the changes?

• This final rule increases the current weekly minimum for a salaried exempt employee from $455 to $684 per week which equates to a gross salary of $35,568 per year.
• The rule also increases the current compensation requirement for highly compensated employees from the current $100,000 per year to $107,432 per year.
• The rule allows employers to use up to 10% of nondiscretionary bonuses and incentive payments to satisfy the minimum salary requirement.

Who is impacted?

Employees who are paid on a salaried basis and qualify for one of The Fair Labor Standards Act’s (FLSA) exemption statuses of Executive, Administrative, Professional, Computer or Outside Sales will need to follow the new final rule guidelines. (The fact sheets to determine if your employees qualify for these exemptions can be found at the U.S. Department of Labor’s website under WHD, Overtime Pay and Fact Sheets.)

Employees who may not meet the duties required for the above exemptions but are paid exceptionally well may still qualify for the Highly Compensated Employee (HCE) exemption. As stated in the changes, these employees must make at least $107,432 per year, of which at least $684 must be paid on a salary or fee basis. There also cannot be any reduction for future pay incentive; however, the employee can be paid in incentives to get the additional $73,864 which is over 67% of the HCE salary requirement.

What do I need to do?

Employers need to evaluate their employees for those who are currently classified as exempt from overtime pay. If they are being paid less than the new minimum of $684 per week or $35,568 per year, employers have two options:

1. Raise the employee’s pay to meet the new minimum threshold or
2. Reclassify the employee as non-exempt and begin paying overtime on hours worked over 40 in a week

Please reach out to a MarksNelson professional for assistance with any questions regarding the new overtime rules set by the Department of Labor. Click here to contact us today.