On January 1, 2020, a shiny ball dropped in Times Square, noisemakers tooted, other noisemakers Tweeted, and the Department of Labor’s new overtime rules went into effect, extending pay for approximately 1.3 million across the nation.
The new rule offers yet another challenge for employers, who are expected to be reclassifying upwards of 1 million employees to non-exempt status in the new year and/or raising pay rates for others to meet the threshold. Business owners will need to keep a keen eye on both salary and job descriptions moving forward.
The easiest mistake to make is believing an employee is exempt simply because he or she is salaried. It’s not always the case, and proper classification will be even more critical under the New Year’s new law, and employers should consider an internal audit to make certain everyone is accurately identified.
Under the Fair Labor Standards Act (FLSA), the new overtime rule, which was announced back in September, changes the threshold to $35,568 in annual earnings ($684 weekly), unseating the previous threshold of $23,660 which had remained untouched since the Bush administration.
This new figure is significantly lower than the $47,000 proposed by the Obama administration in 2016. That rule – intended to bring salaries in line with inflation and living expenses – was blocked nationwide by a district court in Texas.
Companies will now be paying out more wages, overall. But the change is being met with a mixed reaction from reclassified employees – some of whom are energized by the prospect of overtime pay, and others who resent the fact that they must now punch a clock for the first time or feel as though a non-exempt classification is a demotion.
Now, non-exempt workers making less than the new threshold must be paid one and a half times their normal rate after exceeding the 40 hours mark each week.
Employees are considered exempt, however, if they meet the following criteria:
- They are salaried.
- They earn at least $33,568 annually.
- They carry out executive, administrative, or professional job duties.
Additionally, the DOL rule also changed annual requirements for highly compensated employees, in an effort to avoid discrimination between high- and low-wage workers.
- The new threshold for highly compensated employees is $107,432 annually (previously $100,000)
- Workers are considered highly compensated if they:
- Earn $107,432 per year
- Perform office or non-manual work
- Regularly performs the work of an exempt executive, administrative, or professional employee.
Payroll-related changes can be overwhelming, particularly when so much is at stake. Maslow Media Group can help your business remain compliant and stay the course.
MMG specializes in helping business owners navigate legal and tax-related compliance issues associated with Payroll in any industry. We regularly serve as employer of record for companies, handling all expenses, insurance, compliance employment law, and more. Contact us today to set up a consultation or call us at 202-965-1100.