Last fall, the Department of Labor (DOL) announced its final overtime rule which revises the overtime exemption regulations or the Fair Labor Standards Act (FLSA). The rule focuses primarily on updating the compensation levels needed for executive, administrative, and professional (EAP) workers to be exempt.
The new rule became effective on January 1, 2020 and is expected to affect more than 1 million American workers.
■ Raises the standard salary threshold from the currently enforced level of $455 to $684 per week ($35,568 per year).
■ Sets the total annual compensation requirement for highly compensated employees (HCE) from $100,000 to $107,432 per year. (Highly compensated employees are eligible for exempt status if they meet a reduced duties test.); and
■ Amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level.
■ Maintains a special “base rate” threshold for employees in the motion picture producing industry.
“It’s important that employers become familiar with the ruling and the future updates,” Mechele Agbayani Mills, President and CEO of BBB Serving Central East Texas said. “It may also be a good time for employers to review productivity levels to increase efficiency as well as to ensure fair compensation for employees.”
“Any change in established and well-known rules can cause stress for employers, but, in this instance, the rule change is concrete and easy to comply with—something rarely the case in the legal world. Employers need not stress about the rule change if they simply follow the BBB’s compliance advice,” says Eric Kolder, employment lawyer and shareholder at Ramey & Flock, PC, A BBB Accredited Business.
BBB advises business owners to consider the following:
Raise salaries. If your leadership staff who meet the exempt employee requirements are close to the new threshold, and who typically work more than 40 hours per week, consider increasing their salaries to meet the new threshold so that they can maintain their status.
Maintain salaries, but pay overtime. If your employees who meet the exempt employee requirements do not typically work over 40 hours per week, it may make more sense to maintain their current salary and pay them overtime for hours in excess of 40 hours per week.
It’s always a good idea to have employee policies and processes in place which allows staff to work overtime only when it has been preapproved.
Keep in mind, that if the employee does work over 40 hours in a week, regardless of whether you have a policy in place, you are required to pay them overtime. This is where having a (signed) policy in place which explains consequences for violations comes into play. Analyze workload distribution. You might find additional solutions by performing a time and motion study with the purpose of evening out workload distribution levels. For more information about the DOL final rule, go to dol.gov. For additional resources on how to build a better business and on how to be a savvy consumer, go to bbb.org. To report fraudulent activity or unscrupulous business practices, call BBB at 903-581-5704 or report it via BBB ScamTracker.
About BBB: BBB is a nonprofit, business-supported organization that sets and upholds high standards for fair and honest business behavior. Most BBB services to consumers are free of charge. BBB provides objective advice, free BBB Business Profiles on more than 5.3 million companies, 11,000 charity reviews, dispute resolution services, alerts and educational information on topics affecting marketplace trust. Visit bbb.org for more information. There are over 100 local, independent BBBs across the United States, Canada and Mexico, including BBB Serving Central East Texas, which was founded in 1985 and serves 19 counties.