U.S. Department of Labor’s New Ruling on Overtime Pay – What You Should Know

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Here at Paypro, we always like to ensure that we are providing our clients with the latest information on any legal updates that will effect your ability to manage your workforce.

On September 24, 2019, the U.S. Department of Labor announced a final rule to make 1.3 million American workers eligible for overtime pay under the Fair Labor Standards Act (FLSA).

What does this mean for your organization?

A lot. For the first time since 2004, this final ruling acts to update the earnings thresholds necessary to exempt executive, administrative, or professional employees from the FLSA minimum wage and overtime pay requirements, and allows employers to count a portion of certain bonuses (and commissions) towards meeting the salary level.

What will the “Overtime” Final Rule do?

The final rule updates the earnings thresholds necessary to exempt executive, administrative, or professional employees from the FLSA’s minimum wage and overtime pay requirements. They are exempt if they are employed in a bona fide executive, administrative, or professional (EAP) capacity.

Q. What is “overtime”?
Unless specifically exempted, employees covered by the FLSA must receive pay for hours worked in excess of 40 in a workweek at a rate not less than one and one-half their regular rate of pay. This rate is referred to as “overtime” pay.

The new thresholds account for growth in employee earnings since the currently enforced thresholds were first set 15 years ago. In this final rule, the Department is:

• Raising the “standard salary level” from the currently enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker)
• Raising the total annual compensation level for “highly compensated employees (HCE)” from the currently-enforced level of $100,000 to $107,432 per year
• Allowing employers to use non-discretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level, in recognition of evolving pay practices; and
• Revising the special salary levels for workers in U.S. territories and in the motion picture industry.

What does this mean to your employees?

The Acting U.S. Secretary of Labor Patrick Pizzella said it best. “For the first time in over 15 years, America’s workers will have an update to overtime regulations that will put overtime pay into the pockets of more than a million working Americans,” he continued, “This rule brings a commonsense approach that offers consistency and certainty for employers as well as clarity and prosperity for American workers.”

When do these changes take place?

This final ruling will go in effect on January 1, 2020. As we have already now entered the final quarter of the year, we urge you to give some thought on how you will handle internal communication to your employees, as well as how you will handle this increase for your full-year work staff.

If you would like to read the full press release from the Department of Labor:

Please reach out to your dedicated Client Service Representative if we can assist you.

Sincerely,

The Paypro Team