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New DOL Rule Significantly Expands the Number of Employees Entitled to Overtime Pay

by | Sep 30, 2019 | Business And Corporate Law

The U.S. Department of Labor (DOL) issued a new rule on overtime pay. Starting in 2020, employers must pay overtime to employees making less than $35,568 annually ($684.00 per week).

Background Note: The law refers to “non-exempt” as employees entitled to overtime pay and “exempt” as salaried employees exempt from overtime pay. The test for whether an employee is exempt from overtime depends on both salary and job duties. This new rule increases the salary threshold for exempt employees from $23,660 to $35,568. This new rule does not, however, change the existing rules regarding job duties. Exempt status is generally limited to employees performing white-collar job duties.

There are additional exclusions from overtime pay in Washington State, most notably, for agricultural workers employed on farms or ranches. This new DOL rule does not impact those employees excluded from overtime because of an unrelated state law exemption. Please contact an attorney at JDSA to discuss the impending Washington Supreme Court decision on whether the state’s agricultural overtime exemption is unconstitutional. Jose Martinez-Cuevas, et al. v. DeRuyter Brothers Dairy, Inc. et al., Yakima County Superior Court No. 16-2-03417-8, review granted, Washington State Supreme Court No. 96267-7 (oral argument scheduled for Oct. 24, 2019).

companies Should Consider the Following:

As a result of this rule change, companies with employees identified as exempt under the old law, and making between $23,660 and $35,568 a year, will want to weigh the cost of increasing salaries above this new threshold verses paying overtime.

Employers affected by this rule change should also consider the following:

  • Whether to train reclassified employees on timekeeping policies and practices.
  • Whether to implement or expand training on overtime approval policies.
  • Whether to revise benefits or perks which only apply to exempt employees.
  • Whether to restrict off-hour work related emailing/texting, to avoid incurring unintended overtime hours.
  • Whether to train reclassified employees on rest and meal periods.

(In the list above, “reclassified employees” refers to those employees which are currently exempt, but make between $23,660 and $35,568 a year, and as a result, in 2020, will be reclassified as non-exempt and entitled to overtime pay.)

In addition, under the new rule, nondiscretionary bonuses (including commissions) may be counted towards the salary threshold. Such bonuses paid on an annual or more frequent basis may satisfy up to 10 percent of the standard exempt salary level. The new rule also raises the threshold for highly compensated employees from $100,000 a year to $107,432 (this increase is about $40,000 less than what DOL initially proposed).

To learn more about this change or how to prepare, contact an attorney at JDSA Law.