The Department of Labor has FINALLY settled on new rules for overtime that will have a profound impact on the employment landscape for both employers and employees.
As you may recall from the many posts Boznos Law has made on this subject, the original overtime level of pay was set at $433/week ($23,660 annually). This level of pay applies to administrative professionals, executives and professionals. As long as an employee performed certain defined job tasks and was paid at least $23,660 a year, they were considered “exempt” from the overtime laws.
In 2015, the Obama administration proposed new rules for the overtime exemption, asking the Department of Labor to raise the salary threshold to $913/week ($47,476 annually). Many employers immediately jumped to increase salary levels to avoid paying overtime. The problem was that the Obama administration proposal ran into court challenges and was put on indefinite hold until it could be re-evaluated again. Facing a backlash from employers decrying these high salary levels, the Department of Labor opened up for public comment the proposed levels. Most small and medium sized businesses were firmly against raising the levels so high as injurious to their business operations and profit levels.
Now, the Department of Labor has issued new guidelines for overtime pay that are likely to withstand challenge. Effective January 1, 2020, the new overtime salary threshold will increase to $684/week or $35,568 annually. The final rule also allows employers to use non-discretionary bonuses and incentive payments, paid at least annually, to satisfy up to 10% of the salary threshold.
Employers should be preparing to the proposed changes to the overtime levels now. Consider taking the following steps to conduct an internal audit in preparation for the coming changes:
- Review payroll records and identify employees classified as “exempt” or “non-exempt”;
- Review salary information from salaried employees. Identify employees making at least $23,660 per year but less than $35,568 per year. These are the employees that will be most likely affected by the proposed changes;
- Determine whether a salary increase to $35,568 per year is possible for employees impacted by the proposed changes, or whether the employee will become “non-exempt” once the final rule becomes effective;
- Analyze the hours worked by employees who may become non-exempt and determine how many hours, on average, are worked in excess of 40 each week;
- If these employees frequently work more than 40 hours per week, determine whether it is possible to reallocate or reduce job duties to keep hours worked at 40 per week.
With over 35 years’ experience in advising employers and employees on workplace issues, let Boznos Law work with you to ensure you are ready to meet the challenges posed by the changes to the employment laws. Call Bill Boznos today at (630) 375-1958 or contact us at www.boznoslawoffice.com/contact-us through our website.