Effective on January 1, 2020, U.S. companies will have to comply with the revised Federal overtime rule which is expected to increase the number of employees who are entitled to receive overtime pay.
Pay Changes Resulting From Revision
The final rule updates the earnings thresholds necessary to exempt executive, administrative, or professional employees from the FLSA’s overtime pay requirements and allows companies to count a portion of certain bonuses (and commissions) towards meeting the salary level. The new thresholds account for growth in employee earnings since the currently enforced thresholds were set in 2004. In the final rule, the DOL is:
- raising the “standard salary level” from the currently enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker);
- raising the total annual compensation level for “highly compensated employees (HCE)” from the currently-enforced level of $100,000 to $107,432 per year;
- allowing companies to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level, as a result of evolving pay practices; and
- revising the special salary levels for workers in U.S. territories and in the motion picture industry.
Action for Companies
The pending rule changes will require companies to do an analysis and take action. First, companies should review the job duties for their lowest paid exempt employees and determine whether they qualify for overtime pay as a result of the rule change. Second, companies should take the opportunity to correct exempt status errors. Third, companies should plan how to communicate the changes to employees since some employees may be required to track their hours worked – for the first time. Fourth, time-keeping programs and clocks should be updated. Finally, companies should make sure that their policies have rules in place to govern authorization for overtime work.
Mark Knoth leads the firm’s Labor and Employment Practice Group. He represents management in all aspects of workplace law including advising and counseling employers, defending companies in employment litigation, and representing companies in collective bargaining. Mark also has a unique perspective on manufacturing having run his family’s manufacturing business, growing sales and selling it. As a result, he has first-hand knowledge of the intricacies of owning and running a manufacturing company.
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