DOL Announces New Overtime Regulations
The Fair Labor Standards Act requires that most U.S. employees be paid at not less than time and one-half their regular rate of pay for all hours worked over 40 hours in a workweek, unless the employee qualifies for an exemption. On September 24, 2019, the Department of Labor ("DOL") announced changes to the "white-collar" employee exemption and the "highly compensated" employee exemption. The following outlines the changes set to go into effect January 1, 2020.
White-collar employees who meet certain tests regarding their job duties and are paid on a salary basis at a certain salary level are exempt from overtime pay. The current regulations provide that in order to meet this exemption, the employee must be paid at a minimum salary level of $455 per week. Beginning January 1, 2020, this minimum salary level will change to $684 per week. New to this exemption, employers may now use nondiscretionary bonuses and incentive payments, including commissions, paid on an annual or more frequent basis to satisfy up to 10% of the new $684 salary level.
The DOL regulations also contain an exception for highly compensated employees who may not otherwise meet the full job duties portion of the white-collar exemption. While this exemption is not new, the annual salary requirement that makes an individual "highly compensated" is changing. Beginning January 1, 2020, employees who are paid a total annual compensation of $107,432 or more, which includes at least $684 per week paid on a salary basis, are exempt from overtime pay requirements. This is an increase from the current regulations which require annual compensation of $100,000. The requirement that the highly compensated employee primarily perform office or non-manual work and regularly perform at least one of the job duties required by the white-collar exemption does not change.
Before January 1, 2020, we would urge all employers to audit all of their positions and wage and hour practices to ensure that:
- Positions are properly classified as exempt or non-exempt from federal and state minimum wage and overtime rules. Remember, exempt positions must meet both a salary basis test and a duties test.
- Nonexempt employees are being paid properly. Remember, timekeeping records must be maintained, travel time properly paid and certain bonuses and other payments included in overtime calculation.