The wait is now over as the Department of Labor has announced changes to the Overtime Rule that impact exempt and non-exempt employee status. With this revision, the minimum salary threshold for the Fair Labor Standards Act’s white-collar exemption has increased.
The new exemption is now set at $684 per week or $35,568 per year. This will replace the current threshold of $455 per week or $23,660 per year. This means that for employees to be exempt, they need to be making a minimum of $35,568 per year. If your employees make less, they are considered non-exempt. As a result, those non-exempt employees must be paid overtime at one-and-a-half times their hourly rate for hours above 40 per week.
As you may know, this salary threshold debate is not new. In fact, there was a lot of drama in 2016 when a last-minute injunction blocked a similar proposal from the Obama administration. At that time, it would have more than doubled the salary threshold to $47,000 and would have applied a formula to update the level every three years.
While that proposal was seemingly shot down once and for all by a Texas court ruling, it was appealed by the Department of Justice. Those appeal proceedings were pending the outcome of this new rulemaking, so it will be interesting to see how the DOJ proceeds. The DOJ, we believe, will withdraw their appeal based on this new threshold rule as it makes their initial appeal moot.
Naturally, the question is what you can do as an employer. The fact is, you have about three months to prepare before this, likely, goes into place January 1, 2020. Also, these changes are more modest than the original Obama administration issued threshold, so it should not impact as many of your employees that will be reclassified from exempt to non-exempt.
That being said, use this time to evaluate what changes need to be made and how to best make changes. Evaluate which employees now transition into the exempt status and ensure their classification is properly updated and communicated. Also, take a moment to evaluate if any pending salary changes as they could shift status.
If you have any questions, please reach out to us at 303-221-0558. As your Denver area PEO we can help you navigate this new overtime rule and create a strategy to ensure you are compliant by January 1. Give us a call if you need any assistance with any of your employee evaluations.
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