30 Sep Breaking News: Updates to the Overtime Rule
On September 25, the United States Department of Labor issued a final regulation dealing with salary levels for overtime pay. This is the overtime rule. This is not the first time I’ve talked about this, there are other blog posts. But, those posts dealt with the Obama administration. The new overtime rule set the level of salary under which an employee would be considered nonexempt at $684 per week, or $35,568 per year.
To review, an exempt employee is one that an employee who is exempt from overtime and minimum wage laws, while a nonexempt employee is subject to those laws. The salary paid is only one of several factors that must be considered to classify an employee as exempt. Simply because they make a minimum salary does not mean they are exempt from overtime and minimum wage laws.
The Obama administration had proposed a new rule that would almost double that salary level, about $50,000. When the Trump administration took office, that deal was called off. The Department of Labor has been studying where to place the salary level since then.
So, what does this mean for employers? The rule will take effect on January 1, 2020. Employers should look at their salary scale, once again, and make a determination about some of their employees. Employers involved in creative enterprises (writers, graphic designers, commercial artists, game designers, etc.), need to take a long hard look at their salary structure. Some of those employees may not be paid more than $35,000 per year, and if by definition if the salary is less than the threshold, the employee is eligible for overtime if they work more than 40 hours per week.
That can, of course, get expensive rather quickly, so it may be worth it for employers to make a determination whether their employees should get a salary raise to $35,000. That involves a lot of consideration and calculations.
The other question that comes out of this is why business owners can’t just go ahead and give everyone a pay raise and classify all employees as exempt. As stated before, salary level is only one of several factors to consider to determine if someone is exempt from overtime laws. Misclassification of employees is a very serious matter. You need to make sure that your employees are subject to the exemption, meaning they meet the criteria for those exemptions. The most common of those exemptions is the executive administrative professional exemptions, but there are others.
If you need help determining whether or not you should have employees classified as exempt or nonexempt, give us a call.