The US Department of Labor (DOL) has published changes to the Fair Labor Standards Act (FLSA) that will affect which employees are eligible for overtime pay. To be exempt from overtime, employees must be paid a salary meeting a minimum threshold amount and meet certain tests regarding their job duties. The new rule changes the salary threshold for executive, administrative and professional exemptions from its current level from $455 to $684 per week, or $23,660 to $35,568 when annualized.
Implementation
Employers must comply with the new regulations by January 1, 2020. Many employers reviewed and implemented changes in 2016 when the previous administration issued a new ruling, which was eventually stayed by the courts and was not pursued by the current administration. Instead, the DOL opted to reevaluate the changes.
Required changes may include adjusting compensation structures, reclassifying employees, and/or changing salaries. Employers may need to implement more robust timekeeping systems for employees that may be reclassified as non-exempt and whose hours need to be tracked. Employers will benefit from educating employees on what constitutes overtime work and when it may or may not be necessary, so employee communication and training may be needed.
No "easy fixes"
One important thing to note is that simply raising salaries above the new threshold will not guarantee exemption from overtime pay. Even for employees with salaries greater than the new threshold amount, the job duties test must be considered to understand whether employee job duties meet the requirements for exempt status. The job duties test remains the same, even with the new regulations. It is a good time to reevaluate how all positions are classified to ensure compliance.
Other changes
Under the new rule, nondiscretionary 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.
In addition to raising the salary threshold for overtime pay for executive, administrative and professional exemptions, the new rule changes the threshold for highly compensated employees (HCEs) from $100,000 to $107,432 (of which $684 must be paid weekly on a salary basis).
Don't wait to get started
For more information about FLSA or other employee-compensation related questions, please contact senior organizational development consultant Carrie Cox using the information below.
Vice President
HR & Org. Development Services
Carrie has experience in a variety of human resource functions, including labor laws, compensation structures, employee classification, benefits administration, performance management and human resource best practices. She has served clients in a number of industries, including manufacturing, construction, banking, government, and not-for-profits. Carrie is a member of the national and local chapters of the Society of Human Resource Professionals (SHRM) and serves on the Wichita chapter board of directors.
She is a certified practitioner for the Myers-Briggs Type Indicator® and the Hay Group’s Emotional and Social Competency Inventory. Her additional certifications include Certified Professional Coach from the Academy of Creative Coaching, Professional in Human Resources (PHR) from the Human Resource Certification Institute, and SHRM-CP designated by the SHRM.
Information in this document has been obtained by Allen, Gibbs & Houlik, L.C. from sources believed to be reliable. However, AGH does not guarantee the accuracy nor completeness of any information. This communication does not and is not intended to provide legal, accounting or other professional advice or opinions on specific facts or matters, and accordingly, AGH assumes no liability whatsoever in connection with its use. Nothing in this communication can be used to avoid penalties that may be imposed by a governmental taxing authority or agency.