What is the Overtime Rule?
The Department of Labor (DOL) has been talking about a new Overtime Rule, but what does that mean for you? Well, let us first consider the difference between “exempt” and “non-exempt” employees.
Exempt employees are not required to be paid overtime for work over 40 hours in a workweek. They are generally paid a salary or some sort of predetermined amount of compensation on a regular basis. This amount cannot be reduced because of variations in quality or quantity of work per the DOL.
Non-exempt employees generally work hourly and qualify for overtime pay as governed by the Fair Labor Standards Act. This is the largest class of employee according to the DOL.
Currently, the threshold for an exempt employee has been $23,660 and this was established in 2004. The Obama administration tried to update the salary thresholds in 2016, but that rule would have almost more than doubled the thresholds currently in place and it was blocked by a federal judge just before the rule would have become active. After the Trump administration took over, the rule was re-evaluated. In early 2019, the DOL proposed rule still increased the salary thresholds, but not quite to the same degree as its predecessor.
September 24, 2019, the DOL finalized a new Overtime Rule effective 1/1/2020. The new “final rule” increases the salary level for “exempt” employees to at least $684 per pay or $35,568 a year. Any employee who works more than 40 hours, regardless of the job duties, will be required to receive overtime if they are under this threshold. But, the new rule also emphasizes bonuses and incentive payments as options to satisfy up to 10 percent of the standard salary level when qualifying employees for statuses. An employer could consider using bonuses or increasing wages to avoid having to pay overtime on employees if necessary.
The new rule also raises 'highly compensated employees’ from the current level of $100,000 to $107,432 per year. The DOL rule states that “based on the rationale that it is unnecessary to apply the standard duties test in its entirety to employees who earn at least a certain amount annually—an amount substantially higher than the annual equivalent of the weekly standard salary level—because such employees ‘have almost invariably been found to meet all the other requirements of the regulations for exemption.’”
The new regulations are hopefully not quite as much of a shock as the proposed rule in 2016; however, this will still make almost 1 million Americans eligible for overtime.
It will be imperative that employers take a look at both salaries and job duties of their staff and make sure that they are being classified correctly. The DOL has also expressed that they will continue to make salary threshold adjustments more frequently to keep up with current wages and inflation.
For more information reach out to your local TROXELL agent to learn how we can help you make sure your employees are correctly classified and internal policies are up to date. Learn more about TROXELL's HR Solutions.
This information is advisory only. The author assumes no responsibility for management or control of loss control activities. Not all exposures are identified in this article. Contact your local TROXELL insurance agent for coverage advice and policy service. Neither TROXELL nor its affiliates or representatives offer legal advice. Consult with your attorney about your specific situation
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REBEKAH SERVES AS THE HR GENERALIST AT TROXELL. SHE IS A GRADUATE OF OLIVET NAZARENE UNIVERSITY AND IS AN HR CERTIFIED PROFESSIONAL THROUGH THE SOCIETY OF HUMAN RESOURCE MANAGEMENT (SHRM-CP). REBEKAH HAS A DIVERSE BACKGROUND IN HR INCLUDING SAFETY AND MANUFACTURING. CONTACT REBEKAH AT 217-321-3240 OR RDEAL@TROXELLINS.COM