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1 Million More Workers Will Soon Be Entitled to OT

September 25th, 2019

overtime

Now that the Department of Labor has finalized its new rules on overtime, employers have only until January 1, 2020 to decide how to comply.

Tuesday's long anticipated action by the DOL raises the minimum salary threshold for overtime pay from $455 to $684 a week. Employees earning less than the minimum, which works out to $35,568 per year, must be paid time and half for time worked in excess of 40 hours a workweek.

"Review your budgets, consider what positions you might restructure, flag whom you might reclassify to nonexempt or give a salary increase, and think about when, practically speaking, you should implement changes," Fisher Phillips attorney Caroline Brown advised.

The DOL itself estimates that about 1.1 million more workers will be entitled to overtime pay under the new rules.

It may be more cost effective to increase the pay for workers now earning close to the threshold, rather than pay overtime. The calculus becomes more complicated for workers currently exempt because they're paid over $455, but not close enough to the new minimum to make it any easy decision.

Employers also need to consider the impact on morale should only some workers receive raises while others don't. Likewise, it will be important to reassure exempt workers they are not being demoted because now they'll need to track their time.

Although it many cases, the deciding factor in whether or not a worker is entitled to overtime will be the weekly pay, it's technically not the final word. You may also have to pay overtime to workers earning above the minimum if they fail to meet the "duties test." Besides earning at least the minimum, to be exempt, workers must also be one of the following:

  • A manager of others with the authority or significant recommending responsibility to fire, hire or change their status.
  • The employee must be a white collar worker exercising discretion and judgment in the performance of their duties.
  • A professional with advanced knowledge acquired through long study in a specialized field.

In addition, the DOL raised the threshold for highly compensated individuals to $107,432 annually. The rules also allow employers to apply nondiscretionary bonuses and incentives (such as commissions) paid at least annually to satisfy up to 10% of the new salary level.

While the DOL did not change the duties rules, employers should take this opportunity to review the actual job duties currently exempt workers are performing. In case of a dispute, the DOL won't look to the title the employee holds, but will study the kind of work they do and responsibilities they have.

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