New OT Rule Approaches, Employers Expected to Re-Classify Workers

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New OT Rule Approaches, Employers Expected to Re-Classify Workers

The DOL has announced the final rule that will increase the minimum salary for certain white collar exemptions. To be exempt from overtime under FLSA, employees must be paid a salary of at least the threshold amount and meet certain duties tests. These new minimums will take effect January 1, 2020.

  • “White collar” salaried exempt employees must be paid at least $684 per week on a salary basis (an increase from the current minimum of $455 per week). This is the equivalent of $35,568 per year.
  • Up to 10% of this minimum may come from nondiscretionary bonuses and incentive payments (including commissions), so long as these payments are received on at least an annual basis.
  • Teachers, practicing lawyers, practicing doctors, and outside salespeople are exempt from these minimums under federal law, though may be subject to state minimums.
  • With the new rules, exempt Highly Compensated Employees must now make at least $107,432 per year. Of that amount, at least $684 per week must be paid on a salary or fee basis, with no reduction for future incentive pay. The remainder of their income, however—nearly 67% if they make $107,432—may come from incentive pay.

Employers should note that the rule doesn't make any changes to the duties tests, and doesn't call for automatic adjustments to the salary threshold.

A number of states have laws that – because they are more beneficial to the employee – supersede the federal levels. California, New York, and soon Washington, have laws in place that make the minimum salary for exempt employees higher than the new federal thresholds. Remember, employers must follow the law that is most beneficial to employees.

Employer Action Items

Employers now need to evaluate anyone who they currently classify as exempt from OT, but pay less than $684 per week (or $35,568 per year). Once these employees are identified, employers will need to choose between giving them a raise to meet the new minimum to maintain the exemption or reclassifying them as a non-exempt and paying OT.

Meeting the salary cutoff is just one requirement for classifying workers as exempt, so employers should also take the time to review workers' job duties to ensure that they satisfy the applicable exemption's criteria.

In advance of the January 1, 2020 effective date, Employers and HR pros should be:

  • reviewing budgets
  • considering positions that may need to be restructured
  • evaluating exemption classifications and potential pay equity flags, and
  • determining a strategic, meaningful, and reasonable plan for implementing necessary changes

CheckWriters Customers can:

  • Leverage the resources in the HR Support Center by searching “FLSA Changes.” There are a number of resources to help employers navigate the decision-making process and implement changes.
  • In addition, CheckWriters’ Director of HR, Carly Fallon, will be hosting a webinar that will focus on employer action items and best practices as the new OT rule effective date approaches. Look for our webinar invite later this month!

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