The DOL issued its long-delayed final rule update on September 24, 2019 making an estimated 1.3 million workers newly eligible for overtime.
According to a news update from the DOL,
"The new rule does not include automatic adjustments to the salary threshold level. However according to the final rule, the 'Department affirmed its intention to issue a proposal to update the earnings threshold every four years, unless the Secretary determines that economic or other factors warrant forestalling such an update.'
The new overtime rules don’t go as far as the Obama-era decision to double the salary threshold to $47,000 which was met with significant drama from the business and legislative community."
What the New Rule Means for Employers
The FLSA overtime rule determines whether employees are eligible or exempt for overtime pay. Exempt employees, because of their rate of pay and type of work that they do, are not eligible for overtime pay for hours worked over 40 in a workweek. Nonexempt employees must be paid time and a half for any hours worked more than 40 in a workweek.
As we reported previously, the final rule update issued by the DOL issued will increas the salary-level threshold for white-collar exemptions to $684 a week from $455 a week once it becomes effective on January 1, 2020. In the words of the DOL website,
"For the first time in 15 years, America’s workers will have an update to overtime regulations that will put overtime pay into the pockets of more than a million working Americans."
All non-exempt employees covered by the Fair Labor Standards Act (FLSA) must be paid at least one and a half times their regular pay rate for all hours worked over 40 in a workweek. A “workweek” under California law, for example, is any seven consecutive days, starting with the same calendar day each week. It is a fixed and regularly recurring period of 168 hours, or seven consecutive 24-hour periods.
Simply meeting the salary threshold doesn't automatically exempt an employee from overtime pay, however. An employee's job duties must still primarily consist of executive, administrative or professional duties as defined by the DOL's "duties test."
Getting to Know the FLSA Final Rule
It is essential for HR professionals to not only familiarize themselves with the details of the new final rule, but to how to determine overtime eligibility for each of their employees.
Here's an overview of the FLSA's final rule according to the SHRM:
- Workers who do not earn at least $35,568 a year ($684 a week) would have to be paid overtime, even if they’re classified as a manager or professional.
- Non-discretionary bonuses and incentive payments (including commissions) paid on an annual or more frequent basis may be used to satisfy up to 10 percent of the standard salary level.
- The special rule for highly compensated employees would require workers to earn a total annual compensation of at least $107,432 ($684 of which must be paid weekly on a salary or fee basis).
- Special salary levels would apply to certain U.S. territories and an updated base rate would apply to employees in the motion-picture industry.
- No changes to the duties tests.
- The final rule is effective Jan. 1, 2020.
- The Department of Labor intends to propose updates to the salary threshold regularly to ensure that these levels continue to provide useful tests for exemption. Updates would not be automatic and would continue to require notice-and-comment rulemaking.
In addition, the SRHM noted that employers in states such as California have different salary threshold considerations:
"Many states set their own minimum wage, and, in some cases, the exempt salary threshold is tied to that rate. In California, for example, the salary threshold for the executive, administrative and professional exemptions is double the state minimum wage. So, when the minimum wage goes up statewide, so does the exempt salary threshold. California's threshold is currently $49,920 for businesses with at least 26 employees and $45,760 for those with fewer."
These considerations can become even more complex for employers with offices and workers in other states since these multi-state employers may be able to apply the new rule in some wage jurisdictions but not others.
Staying in Compliance With Overtime Pay Laws
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