The Fair Labor Standards Act requires all non-exempt employees who work over 40 hours in a single workweek to be paid overtime at a rate of one and a half times their regular rate of pay. Department of Labor regulations stipulated a minimum salary requirement at which employees would automatically receive overtime pay, regardless of their job duties. Since 2004, to be exempt from overtime pay under the Fair Labor Standards Act’s so called “white collar” exemptions (e.g. executive, administrative professional or professional employees), employees must be paid on a salary basis at least $455/per week as well as perform specific job duties. In 2016, the Obama administration proposed dramatically increasing the salary threshold to $913/week, which would have resulted in as many as 4 million American workers being re-classified as non-exempt overnight. With little less than a month before final implementation, many employers around the country were scrambling to raise the salaries of certain employees to $47,476 to avoid paying overtime. In November of 2016, shortly after the new presidential elections, the courts stopped the proposed salary level increase and we have been in limbo ever since.
Déjà vu all over again! On March 7, 2019, the Department of Labor released a proposed Rule that would change the salary level for overtime to those who earn less than $679/week ($35,308). The proposed Rule would also raise for an employee to be considered a “highly compensated employee” and thus exempt from overtime from the current $100,000 per year to $147,414 per year. The proposed Rule will be subject to public input and comment for a period of 60 days. The Department of Labor anticipates issuing a final Rule in early January 2020, but employers should not wait until that time to audit and review employee classifications and pay rates.
There are options for businesses that employ individuals currently exempt from the income requirements for overtime. If an employee’s earnings are closer to the proposed higher threshold, the employer may consider simply increasing the employee’s salary to be above $35,308 per year so they remain exempt. Alternatively, for those employees for whom a raise is not practical, employers may consider mitigating overtime costs by employers should consider imposing and enforcing strict no-overtime policies or reducing employees’ hours to decrease the likelihood of overtime.
Meeting the salary threshold alone will not make an employee exempt from overtime. There is a strict “job duties” test for the work actually performed in order to qualify. The proposed new Rule would not change any of the “job duties” tests, which makes it imperative that a qualified law firm like Boznos Law help guide you through these areas.
Finally, the proposed Rule does not call for automatic increases to the salary level every year. Instead, it is likely that salary levels will be reviewed every 4 years.
We will continue to update you as the new Rule advances and if and when it is adopted, along with advice on how to implement cost effective business solutions to minimize the added costs associated with this change.
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.