In late September the U.S. Department of Labor issued a new rule that will impact approximately 1.3 million workers starting on January 1, 2020. Under the Fair Labor Standards Act, covered employers must pay overtime to “nonexempt” employees at a rate not less than one and one-half times the employee’s “regular rate of pay” for all hours worked in excess of 40 hours during a work week. Employees who meet both the salary and duties test and who are employed in certain roles are exempt from overtime.
To be exempt under the old rule, an employee had to be compensated on a “salary basis” at a rate of not less than $455/week, exclusive of board, lodging, or other facilities. Starting on January 1, 2020, the salary threshold increases from $455 per week to $684 per week. Thus, employees who were previously exempt but are paid less than $684 per week will have to be paid overtime. The new rule also raises the threshold salary requirement for the “highly compensated employee” exemption from $100,000 per year to $107,432.
It is important to remember that that salary is only part of the test used to determined whether an employee is exempt, and the new rule does not really impact the other parts of the test. Nevertheless, employers with currently exempt employees who will make less than an annual salary of $35,568 in 2020 will need to carefully consider how to address the new rule.
If you have any questions about how the information in this article may affect you or your business, please contact Peter Richter at prichter@stroudlaw.com or (608) 257-2281 or your Stroud attorney.
DISCLAIMER: The information in this article is provided for general informational purposes only, is not necessarily updated to account for changes in the law, and should not be considered tax or legal advice. This article is not intended to create, nor does the receipt of it constitute, an attorney-client relationship. You should consult with your own legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.
