Legal Update: New Overtime Exemption Rules

Effective January 1, 2020, employers will now have to comply with the new overtime regulations finally adopted by the Department of Labor (DOL) which determines when employees can be exempted from overtime compensation under the “white collar exemptions” of section 13 of the Fair Labor Standards Act.

Through an increase in the salary thresholds, it is anticipated an additional 1.3 million employees will be entitled to overtime. The last time such thresholds were raised was in 2004.

The final rule raises the standard salary level to $684 per week (equivalent to $35,568 per year for a full-time employee) and raises the total annual compensation level of “highly compensated employees” to $107,432 per year. Employers are permitted to apply non-discretionary bonuses and incentive payments such as commissions to satisfy up to ten percent of the standard salary level if such payments are paid at least annually. The Department of Labor has further promised to update these thresholds more frequently through notice and comment rulemaking.

Employers should immediately start planning for the impact of these rules on their workforce. Not only will determinations have to be made as to which employees will be affected, employers will have to assure that adequate training is provided regarding time records for those employees new to overtime compensation. Employers should also give special considerations on how they notify their workforce of the implementation of these new rules.  Although many employees may be ecstatic about the prospect of overtime pay, other employees who will now view having to maintain time records as a loss of status.

Employers should also take advantage of these new rules to audit their workforce to assure that those employees they have previously determined to be overtime exempt, truly are exempt. Misclassifying employees is one of the more frequent violations of the FLSA and carries heavy penalties. Now may be an excellent time to consult with your employment attorney for help in implementing the new rules and assuring compliance with the FLSA. You can reach the following Isaac Wiles employment attorneys at 614-221-2121: Maribeth Meluch, Jeff Stankunas, Matt Teetor, and Molly Gwin.