Department of Labor Announces New Overtime Rule
On September 24, 2019, the Department of Labor (DOL) announced the final ruling on the changes to the overtime law. Under these changes, the DOL anticipates that an additional 1.3 million people will be eligible for overtime pay under the Fair Labor Standards Act (FLSA).
The new ruling goes into effect January 1, 2020. The ruling updates the earning thresholds that are required to exempt employees from overtime pay requirements. There has not been an update to the current thresholds since 2004. The new ruling sets the following:
- Raises the Standard Salary Level from $455 per week ($23,660 annually) to $684 per week ($35,568 annually).
- Raises annual compensation level for Highly Compensated Employees (HCE) from $100,000 to $107,432 per year.
- Allows employers to use nondiscretionary bonuses and incentives (including commissions) that are paid at least annually to satisfy up to 10% of the standard salary level.
- Revises the special salary levels for workers in US territories and in the motion picture industry.
The new ruling does not modify the current job duties tests.
Prepare for the New Overtime Law
With the increase in the Standard Salary Level, more employees will be eligible for overtime. Therefore, it is important that you strategize on how to minimize the financial impact to your company. Here are some ways to prepare:
- Review all exempt employees that make less than the proposed threshold. Make determinations if you will increase their salary or make them nonexempt.
- Forecast the financial ramifications of the changes and budget accordingly.
- Review the job descriptions for the affected positions to ensure they properly reflect the positions exempt/nonexempt status.
- Develop a strategy on how you will communicate any changes in classification to your employees.
It is very important for businesses to prepare and plan for these changes. Lack of planning can lead to undue financial costs and decreased morale for affected employees.
We suggest that companies do not make the changes effective until January 1, 2020. Any last minute court challenges could delay the effective date of the ruling.
Do You Have Questions about Overtime?
Do you have more questions about how this new ruling may affect your business? MyHRConcierge can help. We provide human resources compliance counseling for all types of small to mid sized businesses across the United States.
Get a free consultation with one of our human resources experts today.