Here Come the New Overtime Rules!

This week, we lay out the new rule regarding who qualifies for overtime pay and who doesn’t. The U.S. Department of Labor released the final rule this past September, and it’s poised to take effect on January 1, 2020. With the possibility that currently exempt employees won’t continue to qualify for their exemptions under the new rule, you need to take action now.

Federal law requires most employees to be paid overtime when they work more than 40 hours in a workweek. Certain executive, administrative, and professional employees are exempt, though.

To qualify as exempt, an employee must satisfy three tests:

  1. Salary basis test. The employee is paid a predetermined and fixed salary not subject to reduction due to variations in the quality or quantity of the work performed.
  2. Salary level test. The employee is paid at or above a prescribed threshold.
  3. Duties test. The employee primarily performs specific executive, administrative, or professional duties.

An employee’s job title is irrelevant if he or she doesn’t meet the tests.

The final rule increases the salary level threshold for the first time since 2004. It raises the level from $455 per week (or $23,660 annually) to $684 per week (or $35,568 per year). The DOL expects the change to expand the pool of overtime-eligible employees by more than 1 million.

If your employees’ pay meets or exceeds this amount — and they satisfy the salary basis and duties tests — you don’t have to pay them overtime. Conversely, employees that are paid less than the threshold amount automatically are nonexempt.

To learn more about the new overtime rule and how you should prepare for it, read our new article The Overtime Rules Change on January 1: Are You Ready?

Best regards,
Matt Humphrey
President