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U.S. Department of Labor: New Overtime Rules

Potentially significant employee HR/payroll changes lie ahead in the new year, and the time is now for employers to plan ahead. Announced on September 24, the Department of Labor (DOL) has mandated that, effective January 1, 2020, employees classified as salary-exempt earning less than $35,568 yearly and who work more than 40 hours per week may now be eligible for overtime pay. Those who no longer qualify as Exempt must be paid 1.5 times their regular hourly rate for any overtime worked. Highly compensated classified employees will now be required to be at a minimum salary threshold of $107,432 to maintain that exemption.

Since 2004, the DOL has prioritized rectifying salary discrepancies, through increases in wage and salaries, with a goal of leveling the playing field for the over 1.3 million American workers who are eligible for overtime under the Fair Labor Standards Act.

Companies that currently have classified salaried exempt employees who fall under the current salary threshold should consider reviewing payrolls immediately to identify opportunities for those employees to earn bonus incentives or compensations that increase their total salary before the end of the year. In doing so, employers should also review employee job functions relative to classification, as well as other factors that could change employees’ salaries by the end of the year for 2020.

According to the DOL, the final rule “updates the earnings thresholds necessary to exempt executive, administrative and professional employees from the Fair Labor Standards Act’s minimum wage and overtime pay requirements and allows employers, if desired, to count a portion of certain bonuses/commissions toward meeting the salary level. The new thresholds account for growth in employee earnings since the thresholds were last updated in 2004. Specifically, in the final rule, the Department is:

  • 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 percent 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.”

View more information and resources on the new rule from the U.S. Department of Labor here, and contact a Rehmann representative for assistance reviewing your HR/payroll and planning before the rule takes effect or if you have any questions regarding the new rule.

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