New overtime rules developed by the US Department of Labor (DOL) are scheduled to go into effect on January 1, 2020.
These rules, announced last week, are expected to make 1.3 million American workers newly eligible for overtime pay.
Employees are excluded from overtime protection if they are salaried (that is, their pay is not subject to reduction based on quality or quantity of work performed), earn at least a specified amount, and primarily perform duties considered executive, administrative, or professional by the DOL.
Currently, the salary must be at least $455 weekly ($23,660 per year). The new rules raise the pay threshold for overtime protection to $684 per week ($35,568 per year).
Employers are now allowed to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10% of the standard salary level.
Employees who are not paid at least $684 a week (including bonuses as noted above), must receive overtime pay at the rate of 1½ times their regular hourly rate for all hours worked in excess of 40 per week.
Even if the salary requirements are met, employees will generally be entitled to overtime protection unless their job duties meet DOL requirements.
To qualify for the executive employee exemption, all of the following tests must be met:
The employee must be compensated on a salary basis at the required rate;
The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees must be given particular weight.
To qualify for the administrative employee exemption, all of the following tests must be met:
The employee must be compensated on a salary basis at the required rate;
The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or its customers; and
The employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.
To qualify for the learned professional employee exemption, all of the following tests must be met:
The employee must be compensated on a salary basis at the required rate;
The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;
The advanced knowledge must be in a field of science or learning; and
The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.
To qualify for the creative professional employee exemption, all of the following tests must be met:
The employee must be compensated on a salary basis at the required rate; and
The employee’s primary duty must be the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.
The rules providing automatic overtime exemptions for those engaged in certain specified professions, including doctors, teachers, and lawyers, and for those working in outside sales, will remain in effect, as will the special overtime rules for computer employees.
The current DOL rules also provide that certain highly compensated employees are excluded from overtime requirements, so long as their primary duties include performing office or non-manual work and they customarily and regularly perform at least one of the exempt duties or responsibilities of an exempt executive, administrative, or professional employee.
This exemption remains in effect under the new rules, though the minimum highly compensated salary will increase from $100,000 to $107,432 per year.
Individual jurisdictions (states, counties or cities) may have more stringent requirements for classification of a worker as exempt, so it’s important to verify which standard applies to your employees.
Whether you are an employee or an employer, please feel free to contact us if you have questions about whether an employee is exempt from overtime and minimum wage laws or whether an employee is “exempt.”
Photo by Charlz Gutiérrez De Piñeres on Unsplash.jpg
