New Overtime Rule: Exempt Threshold To Increase from $23,660 to $35,568 January 1, 2020

WHAT HAPPENED?

This Tuesday (September 24, 2019), the Department of Labor announced the following changes to the FLSA’s white-collar overtime exemptions, to become effective January 1, 2020:

  • The minimum salary threshold for exempt status will be $684 per week, annualized to $35,568 per year.
  • The highly compensated employee exemption’s total annual compensation requirement will be set at $107,432 per year (to include the new threshold as minimum weekly base salary).
  • No change has been made to the various other exemptions (for example, outside sales) that do not specifically include a salary requirement even if the employee happens to earn a salary.
  • There will be no “automatic” threshold updates, such as cost-of-living increases.

If you recall, a much higher increase had been set to become effective back in December 1, 2016, but was scrapped by federal and state court actions. While there is no way to guarantee that legal challenges might not delay or alter this latest ruling, we strongly advise our clients to plan for a January 1st implementation.  The new threshold formula and guidelines are less flawed are much less contentious, with the majority of the concerns driving the 2016 lawsuits resolved.  Overtime Rule 2.0 looks like a solid go.

WHAT SHOULD I DO NOW?

First, evaluate your compensation structure to see if anyone who is currently exempt will fail to qualify under the new threshold.  Take a moment to consider whether they might be subject to alternative FLSA exemptions.  If not, develop new FLSA compliant pay plans (either applying overtime pay or increasing exempt salaries).  Determine the timing, administrative tasks, and communications necessary to meet the January 1st deadline.  Then stay tuned to ConsultStu for the updates you need to keep your company on track.  NOTE: If you are a ConsultStu retainer client, Stu will be covering this topic at your next monthly HR support call, and we will assist you with any needed preparation!

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