What it is and what employers need to do now

On September 24, 2019, the Department of Labor issued a final rule on overtime pay eligibility increasing the minimum salary threshold to $35,568 annually or $684 weekly. This followed a halted, never-implemented rule announced in 2016 to increase the level to $47,476. The increase is the first since 2004 and will take effect on January 1, 2020.

Overview of determining overtime pay exemption.

Any work performed by an employee that exceeds 40 hours per week is “overtime.” All employees, including nonprofit employees in almost every case, are eligible for premium pay (typically 1.5 times employee’s rate) for overtime unless a specific legal exemption exists. Employers have the burden of proving an exemption, and, if employees are misclassified, employers may owe extensive penalties and back pay.

To be considered exempt, an employer must satisfy three tests:

  • Employee is paid on a salary basis.
  • Employee is paid at or above the minimum salary level.
  • Employee’s primary duty meets requisite exemptions (usually executive, administrative, or professional).

Because the duty test is complex and misclassification can be costly, please seek help from an HR or legal professional when making determinations.

What should employers do?

Employers should immediately identify exempt employees paid less than the new threshold and review their work data. Employers will have to weigh options to remain compliant while considering their overall budget. This is a good opportunity to evaluate the job duties for all employees, especially the lowest paid exempt employees.

After this review and planning, employers must carefully communicate the effect of their decisions. Many employees and their managers may require new time-tracking procedures and training.

Key takeaways:

  • Don’t delay in assessing the new rule’s impact on employees. The new rule takes effect in less than 3 months.
  • Assess job duties of employee’s affected as well as others. Confirm proper classification and review organizational structure.
  • Expand and improve time tracking for all employees.
  • Consult professionals to strategize restructuring and communication and legal compliance.

Need help?

Sarah Kissel with Scholz Nonprofit Law is available to assist at sarah@scholznonprofitlaw.com or 608-268-0076.

This blog post is intended to convey general information only and not to provide legal advice or opinions.