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PLNA e-News: Protecting Values In the Nation

DOL Issues New Overtime Regs

Monday, October 14, 2019   (0 Comments)
Posted by: Gregg Robertson
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WASHINGTON, D.C. - The federal Department of Labor (DOL) issued final regulations on September 24, 2019 concerning the much-anticipated revised threshold for workers exempt from overtime pay. The new regulations take effect on January 1, 2020. The rule raises the minimum salary threshold for employees exempt from overtime pay to $684 per week ($35,568 annually) from the current $455 per week ($23,660 annually), an increase of 50 percent. This salary threshold last was updated in 2004.

The Obama Administration had proposed raising the salary limit for mandatory overtime to $913 per week ($47,476 annually) starting Dec. 1, 2016, but a federal judge stopped implementation of the change. Some thought the Trump Administration would kill the rule completely, but former Labor Secretary Acosta said in his confirmation hearings that he believed the threshold should be revised upward. (See PLNA e-News June, 2016). 

What this means is more of your employees could come under the federal overtime rules. Salaried employees who perform work that is primarily executive, administrative, professional or outside sales that may have been exempt from mandatory overtime pay will now come under those rules if their salary is less than $684 weekly or $35,568 annually.

In addition to raising the minimum salary threshold for employees exempt from overtime pay, the new regulations also:

  • Raise the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year;
  • Allow employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level. 

How would this new regulation affect your company?

It’s important to realize that this new regulation will only affect jobs that are exempt from the Fair Labor Standards Act (FLSA) overtime rules and are paid less than $684 per week. Any jobs that are paid on an hourly basis are not exempt from the FSLA overtime rules and will not be affected by this rule change.

Who can be exempt?

Look at how many of your employees are currently exempt employees. If you don’t know which of your employees are exempt, here’s a brief rundown of the three criteria that determine whether an employee is exempt. An employee must meet all these criteria to be considered exempt. More detailed instructions for determining whether an employee is exempt can be found on the DOL website.

·         Must be paid a salary - First, to be exempt, employees must be paid a salary. Being paid a salary is defined by DOL as “an employee (who) regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent basis, regardless of the number of days or hours worked.”

·         Must be paid at least $455 per week now or $684 after new rule is implemented January 1, 2020 - Second, to be exempt, the employee must be paid a salary of at least $455 a week now or $684 when this regulation takes effect.

·         Must be executive, administrative, professional or outside sales - Third, and this is the most complicated part of this regulation, to be exempt the employee must be performing work that is executive, administrative, professional or outside sales. The DOL has much more detailed definitions for each of these categories of exempt work, so you should visit the DOL website if you have questions about what constitutes work in each of these categories.

Exempt employees who are being paid a salary greater than $684 a week will not be affected, but employees who are now exempt and making less than $684 per week will no longer be exempt from overtime requirements after the proposed rule takes effect.

Green industry companies are most likely to have exempt employees in jobs such as administrative office work, designers and landscape architects, sales and some higher-level supervisory personnel.

Minimizing the impact

Company owners must implement the changes by January 1, 2020. You can minimize the financial impact of the new regulations by:

  • Limiting the hours of nonexempt employees to minimize overtime payments;
  • Providing raises to nonexempt employees (who otherwise meet the salary and work requirements for exempt employees) that would take them over the $684 per week salary threshold if that would be less expensive than paying overtime;
  • Set the hourly wages of newly nonexempt employees so their regular time plus overtime averages out to their previous salary; or
  • Hire a part-time employee at straight-time to pick up the time-and-a-half overtime of another non-exempt employee.

Review job descriptions and classifications

Company owners also should review the job descriptions and classifications of their employees to be sure that they correctly are applying the DOL regulations for exempt employees beyond just the salary limitation.

Many company owners believe that by simply offering an employee a salary above the threshold that they are exempt from the FLSA. However, employees must also meet the tightly defined job definitions to be considered exempt. These definitions have not been changed by the new regulations.

Audits and enforcement
Violating the overtime provisions of the FLSA can subject a company to paying back wages, liquidated damages, fines and penalties. DOL likely will be stepping up audits and enforcement actions now that these new rules are final.

Need more information?

More information on the new rule can be found on the DOL website


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