FLSA Overtime Rule Has Been Updated for a January 1, 2020 Effective Date
On September 24, 2019, the U.S. Department of Labor announced an updated, final rule for overtime pay under the Fair Labor Standards Act (FLSA). These changes are set to go into effect on January 01, 2020.
To account for growth in employee earnings since 2004 when the current threshold level was set, the final rule not only updates the exempt employee earnings thresholds (which is the most significant change), but also allows employers to count a portion of certain bonuses (and commissions) towards meeting the salary level. Specifically, the changes are:
- Increase the “standard salary level” (threshold) from $455 to $684 per week (equivalent to $23,660 per year raised to $35,568 per year).
- Raise the total annual compensation level for “highly compensated employees (HCE)” from $100,000 to $107,432 per year.
- Permits employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level.
Special Note About Teachers and Coaches
Regardless of their salary amount, the DOL has clarified that teachers and coaches (Read the FLSA Opinion Letter) – defined as having a primary duty of “teaching, tutoring, instructing or lecturing in the activity of imparting knowledge, and if they are employed and engaged in this activity as a teacher (or coach) in an educational establishment”(Read the U.S. Department of Labor Fact Sheet #17D – Exemption for Professional Employees Under the FLSA here), are exempt automatically.
There is no minimum salary for these instructional employees.
What should I do now to prepare?
- Review the FLSA classification of your non-teacher, non-coach employees by assessing, first, their duties.
- Ensure that employees are properly classified as exempt or nonexempt based on duties. Coverage details here: https://www.flsa.com/coverage.html
- Note that the job title of a position is not significant in assessing duties. It is the actual work performed that matters.
- Calculate the weekly pay amount of these employees by taking their annual amount paid divided by the number of weeks in which they perform any work.
- For year-round employees, this will be 52 weeks. However, especially in a school setting, some employees may work less than 52 weeks in a year depending on their duty calendar.
- If the employee earns less than $684 per workweek, consider two options:
- Option 1: Raise the employee’s salary to meet the new $684 minimum threshold beginning January 1, 2020, so that they earn a minimum of $684 for each workweek; or
- Option 2: Reclassify the employee to nonexempt, for which they will track hours, be paid based on number of hours worked each week, and become eligible for overtime pay for any hours in excess of 40 in a workweek.
CSS is here to partner in all your HR efforts, including determining pay classification status of your employees and implementing action plans to maintain compliance with the ever changing DOL rules. Contact Jordan Elliott, COO for more information.
The official news release from the U.S. Department of Labor is here, at which more information is available: https://www.dol.gov/newsroom/releases/whd/whd20190924
Also, more information is available here: https://www.dol.gov/whd/overtime2019/