It is hard to believe that the on-again, off-again subject of overtime rules is back in the news. But here we are folks – and it’s definitely back on.
On September 24, the Department of Labor (DOL) issued a final rule that employees who make less than $35,568 are now eligible for overtime pay. The new rate will take effect Jan. 1, 2020.
The new rule will raise the salary threshold to $684 a week ($35,568 annualized) from $455 a week ($23,660 annualized).
If you recall back in 2016, employers and employees everywhere prepared for an unprecedented change that would more than 1 million exempt employees in line for overtime pay, where they were not eligible previously. The Obama-era rule would have doubled the threshold to $913 a week, or $47,476 a year.
Companies everywhere scrambled to prepare – they changed payrates, cut hours, laid off employees, and increased and decreased pay – only to have the ruling not go through at the last minute. And when I say last minute, let me remind you that on November 22, 2016, a judge blocked the ruling that was to go into effect on December 1, 2016! It was a nightmare for so many.
We now have a definitive ruling. (Whether it is good or bad news depends on which side of the situation you’re on.)
To be exempt from overtime under the federal Fair Labor Standards Act (FLSA), employees must be paid a salary of at least the threshold amount of $35,568 and meet certain duties tests. If they are paid less or do not meet the tests, they must be paid 1-1/2 times their regular hourly rate for hours worked in excess of 40 in a workweek.
According to the National Association of Human Resources, the new overtime rule will result in the reclassification by employers of more than a million currently exempt workers as nonexempt and an increase in pay for others above the new threshold. The proposal does not call for automatic adjustments to the salary threshold, does not create different salary levels based on region of the country and does not make any changes to the duty’s tests.
SHRM also reminded employers and employees that meeting the salary threshold doesn't automatically make an employee exempt from overtime pay. The employee's job duties also must primarily involve executive, administrative or professional duties as defined by the regulations.
What does this mean for employees?
What does this mean for employers?
If you are going to take risks in your business, this is not one of them to take! It is a federal ruling and the consequences for not following the rules are not a joke. According to the DOL website, in addition to the rights and remedies available to persons through private suits for violations of the Act, there are a variety of steps that the DOL can take:
It’s said that change is the only constant in life. That’s certainly true for HR regulations. What doesn’t change, however, is the need to comply with them. The clock is officially ticking on this new overtime threshold.