Are you in compliance with the new rule on overtime pay?

The Department of Labor has updated the earnings thresholds that exempt executive, administrative and professional employees from minimum wage and overtime pay requirements. These thresholds were last updated in 2004, so you should review your pay practices to ensure you’re in compliance when the new rule goes into effect on January 1, 2020.

The minimum salary level for exempt employees increases from $455 per week to $684 per week – or $35,568 per year.

Employers are now permitted to credit nondiscretionary incentives and commissions toward up to 10 percent of the minimum salary amount, so long as these payments are made on an annual or more frequent basis. Catch-up payments are possible after year-end. But since timing and tax issues come into play, you should review these options with your accounting and compliance teams.

The total annual compensation requirement for highly compensated employees has also increased – from $100,000 to $107,432. To be exempt from overtime, these employees must receive at least the minimum salary of $684 per week, with the remainder of their compensation coming from nondiscretionary incentives, commissions or year-end catch-up payments.

While the minimum salary requirements for exemption from overtime pay are increasing, other provisions of the Fair Labor Standards Act remain unchanged – including the duties test, hours worked, overtime calculation, worker classification and the exemption for outside sales employees.

Please contact us with any questions.