A major change is on the horizon for business owners and employees under the federal labor law. The U.S. Department of Labor (“DOL”) recently announced the publication of its final rule amending overtime regulations under the Fair Labor Standards Act (“FLSA”), which will take effect on December 1st of this year. The new regulation will more than double the annual salary threshold from $23,660 to $47,476 for determining whether certain white-collar employees – those in executive, administrative, professional, or certain IT positions – are exempt from FLSA overtime rules.
In layperson’s terms: a salaried employee in certain positions, who makes less than $47,476, will now be eligible to receive overtime pay. (Employees who are paid hourly are generally already eligible for overtime pay.)
It has been anticipated that the change will impact over 4 million employees. Under the current (and soon to be replaced) rule, only 7% of full-time salaried employees qualified for overtime; under the revision, 35% of salaried employees will be eligible. (It should be noted, however, that in 1975- the time of the last major expansion of overtime hours- as much as 60% of the workforce was covered. In order to achieve those numbers, the threshold would have had to have been raised to an inflated adjusted $51,000.)
Additionally, the salary threshold for the exemption has been raised from $100,000 to $134,004 for so-called “highly-compensated employees”. The salary test, however, is only a threshold test and an analysis of an employee’s duties will still be necessary in order to determine if an employee qualifies for the exemption.
Beginning January 1, 2020, the new regulation will update the salary threshold every three years, in order to keep pace with inflation.
The new rule will allow up to 10% of the salary threshold for these exempt positions to be satisfied by non-discretionary bonuses, incentive pay, or commissions, provided that such payments are made on at least a quarterly basis.
For those positions that are currently exempt, but which won’t meet the increased salary threshold, employers will have several options:
1. Reclassify the positions as non-exempt and either pay overtime to those employees for hours worked over 40 hours or take proactive steps to limit them to not more than 40 hours work per week; or
2. Increase the employees’ salaries to the new salary threshold.
An analysis of which steps are appropriate in a given workplace should involve consideration of economic factors as well as the effect any changes may have on employee morale. Contact our Award Winning New York Employment Law Attorney today for a confidential consultation to learn how the change in the law will impact you.
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