Breaking news! The salary threshold is now $35,568!
For the first time in 15 years, overtime regulations received an update. The DOL has now finalized the much-anticipated changes to Obama-era white-collar exemptions under the Fair Labor Standards Act (FLSA). Over one million employees are expected to be re-classified from exempt to non-exempt.
Here is the quick summary of the changes:
Currently: $23,660 annually ($455 per week)
Jan. 1, 2020: $35,568 annually ($684 per week)
Highly Compensated Employees/Salary Threshold
Currently: $100,000 annually
Jan. 1, 2020: $107,432 annually
There are certainly some positive aspects to the rule for employers as well. While the DOL will likely be increasing these thresholds in years to come, this rule does not institute automatic adjustments over time (as originally proposed). The new rule also permits employers to count some non-discretionary and incentive payments, like commissions, towards the new threshold.
Here is what we recommend doing before the New Year:
- Update job descriptions. We cannot emphasize this enough! Job descriptions should not be carried forward from the dinosaur days. Duties, including essential duties, often change over time! Get your front-line managers to review, confirm, and update all duties for each position. This will ensure you can accurately rely on the job descriptions to properly classify employees.
- Conduct an FLSA audit. Audit your employee classifications to ensure employees are properly categorized. Flag those employees who are classified as exempt but fall below the new salary threshold to see where changes need to occur.
- Consider your options. To comply with the new rule, you will likely need to think about increasing salaries, restructuring jobs and job duties, and/or changing certain employees to non-exempt. These are just a few of your options. Review your budget and start to plan.
- Plan the roll-out. Rolling out new changes is hard and can be upsetting for employees if they hear they will not be receiving a set salary anymore. (It could certainly sound like a demotion!). Brainstorm the most effective message to your workforce. Also, don’t forget you will likely need to train any newly-converted non-exempt employees and managers on recording time properly and not working off-the-clock.
The new rule can seem daunting—and the FLSA itself is not simple. It is always good to rely on the advice of counsel when working through classifying and compensating employees appropriately. A simple misclassification can cost you years of litigation and attorney’s fees along with penalties from the IRS. Do not hesitate to ask us when it comes to conducting a proper and thorough audit and implementing changes to comply with the new rule.