New Salary Threshhold for “Salaried/Exempt” Employees

Employees who make less than $35,568 must now be raised to that level or be reclassified as non-exempt/hourly employees.  If employers reclassify these employees to non-exempt/hourly, the employee would be eligible for overtime pay under a final rule issued by the U.S. Department of Labor (DOL). The new rate will take effect Jan. 1, 2020.

To be exempt from overtime under the federal Fair Labor Standards Act (FLSA), employees must be paid a salary of at least $35,568/year or $684/week and meet the Exempt Level duties tests. If they are paid less or do not meet the tests, they must be re-classified as non-exempt/hourly employees and be paid 1 1/2 times their regular hourly rate for hours worked in excess of 40 in a 7-day workweek.

The Details

• Under the new rule, nondiscretionary bonuses (bonuses that are tied to a performance, quality or attendance metric) and incentive payments (including commissions) may be used to satisfy up to 10 percent of the standard salary level.
• The new ruling does not make any changes to the duties tests.  Call if you want to review the “duties test”

What Employers Should do Immediately

1. Immediately pull payroll data for exempt workers earning below $35,568 and review your budgets to determine whether the company can afford to increase the salaries of these individuals and consider what positions you might re-classify to non-exempt/hourly positions and think about when you should implement changes.
2. If employers decide to re-classify employees to non-exempt/hourly status, they will need to track affected workers’ work time and pay overtime premiums for all hours worked beyond 40 in a 7-day workweek.
3. Employers should develop a communication strategy to make sure that re-classified employees know they are not being demoted, but that the company is simply following the new Dept. of Labor laws.
4. Employees who will be required to track their hours for the first time—as well as their managers—will need training on time-keeping procedures.
5. Employers should also develop plans and procedures to manage or limit overtime hours worked by newly non-exempt workers.

Best Practice:  If your payroll system allows, give Supervisors/Managers access to the timekeeping system and instruct them to review their team’s “punches” on a regular basis.

Call if you have any questions!

Regards,

Thank you for reading!