What Employers Need to Know About the 2020 Overtime Exemption Rule

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The New DOL Overtime Rule is Raising the Overtime Salary Threshold and Affecting Companies Nationwide

 

For the first time in 15 years, the United States Department of Labor (DOL) ruled to increase the standard salary minimum for overtime eligibility, increasing it to $35,568 on Sept. 24, 2019.

Beginning Jan. 1, 2020, all employees who make less than the new minimum are eligible for overtime pay. With employers across the nation having to reclassify more than 1.3 million workers, Employer Support Services is assisting employers in understanding and adjusting to the new ruling. If you are an employer, we have provided the essential information you need about the new ruling below and are here to help with additional services.

 

Updating the Standard Salary Level – How it Was Determined

The DOL stated that the overtime salary threshold update was long overdue to meet the wage and salary growth that America has seen since its last update in 2004. The DOL determined the increase after extensive research through public comment, listening sessions, and long-standing calculations in the census regions, including the Northeast, Midwest, South, and West.

 

What Employers Need to Know About the DOL Overtime Exemption RuleLate night office worker working overtime.

With the DOL overtime rule update, employers are having to start the process of evaluating their current workforce and making decisions on whether or not they should keep current employees at a nonexempt status or raise their pay to meet the new federal minimum.

Nonexempt Status

The DOL defines overtime pay – “Unless exempt, employees covered by the [Fair Labor Standards] Act must receive overtime pay for hours worked over 40 in a workweek at a rate no less than time and one-half their regular rates of pay.” Employers with workers that make below the minimum salary or who do not qualify for exemption must meet the overtime rule of time and a half. The Act applies only to hours worked in a regular workweek and excludes work performed on Saturdays, Sundays, holidays, or days of rest unless overtime is worked on those days.

Exemption Rules

Employees who are exempt from the new rule include employees who are salaried and meet the minimum weekly salary of $658 or annual salary of $35,568 and who perform in an executive, administrative, or professional capacity as defined by the Department of Labor’s regulations duties test. All other employees are subject to the Fair Labor Standards Act, including the new overtime ruling.

Commission, Incentives, and Bonuses

Employers can use non-discretionary bonuses, incentive payments, and commissions to meet up to 10 percent of the standard salary requirement.

Highly Compensated Employees

The new ruling also raises the total annual compensation requirement for highly compensated employees from the current $100,000 to $107,432.

 

Next Steps in Preparing Your Company for the DOL Overtime UpdateBusiness executive working overtime at night in the office

Employers should begin evaluating employee data for nonexempt workers immediately. In addition, employers should also consider budget restraints as they may affect salary increases. Talking to HR professionals, such as Employer Support Services, is advised in order to accurately determine whether or not you should reclassify employees by raising their annual salary or keep them at nonexempt status and pay overtime when required.

Employer Support Services can help you evaluate employee duties on an hourly basis to see if they meet the duties test for overtime pay. Time tracking systems and bonus tracking will be more important than ever as employers begin to evaluate their employees’ classifications. Contact Employer Support Services today for help in reclassifying employees and using employee systems so you are not left overpaying.

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