Three Tips to Get Compliant with New Overtime Requirements

Tuesday November 12th, 2019

On September 24, 2019, the Department of Labor announced a final rule that updates the thresholds for executive, administrative, and professional employees under the Fair Labor Standards Act (FLSA). The changes are slated to go into effect on January 1, 2020. These modifications to the FLSA are expected to extend new protections to over 1.3 million workers across the country because it qualifies them for overtime pay.

The standard salary level threshold changes from $455 per week (or $23,660 per year) to $684 per week (or $35,568 per year). In other words, any employee who earns less than the new threshold will qualify to earn overtime pay when he or she works over 40 hours in one week.

In addition to changing the overtime rules, the new regulations also raise the minimum salary for highly compensated employees from $100,000 to $107,432. (Note: a highly compensated employee is one whose pay is in the top 20 percent of compensation for the company, or one who is a five percent owner or more in the company.)
Employers may use nondiscretionary bonuses and incentive payments to meet up to 10 percent of the modified salary level, including commissions. 

Professional, executive, and administrative employees’ duties have not changed.

While the January 1 deadline might seem far off, it is crucial for companies to begin now in making modifications to their processes that will keep them in compliance. These three tips can help organizations begin preparing for the shifts.

  • Reevaluate Workloads
    Highly compensated employees who are consistently coming in above the new threshold could end up costing the organization a lot of extra money in overtime pay. Look into options such as transferring tasks to a staff member who earns a lower hourly rate or who doesn’t have as much to do. It might even make sense to bring on new hires to lessen the burden on employees as well.

  • Track Hours
    In some organizations, employees simply show up and work, then leave for the day without tracking how much they work. As a result, these employers won’t have any idea whether the company is complying with the new regulations. Start now to implement an accurate time tracking and attendance system, even for salaried employees. This allows supervisors to track hours and be aware of when an employee must be paid for overtime work.

  • Shift Employee Classification
    Because these changes to the FLSA laws apply to exempt employees, it may make sense to reclassify employees as non-exempt to eliminate the risk. You can also raise an employee’s salary to put him or her above the threshold, but be cautious to maintain fairness.

In order to maintain compliance, employers should start implementing new policies now.