Employers Get Ready: New Overtime Rules

On September 24, 2019, the U.S. Department of Labor announced a final rule to make 1.3 million American workers newly eligible for overtime pay. The new rule goes into effect on January 1, 2020.

The three most important changes are as follows:

  • raising the “standard salary level” from the currently enforced level of $455 per week to $684 per week (equivalent to $35,568 per year for a full-year worker);

  • raising the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year;

  • allowing employers to use non-discretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices;

Employers should prepare for these changes now or as part of their year-end performance and compensation reviews, and ensure that each employee impacted by the change is carefully reviewed and their status is adjusted accordingly.

It is important for employers to remember that whether an employee is exempt from overtime pay is a legal determination, not an employer, or employee preference. The salary threshold is one of the two tests employers must meet in order for the employee to be exempt. The second involves a careful review of employee's roles and responsibilities. Years of experience in this area show that cost of a compliance review are substantially less than the cost of non-compliance found during an audit.

If you have any questions, or would like more information on this topic, please do not hesitate to reach out to us!

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