Beginning January 1, 2020, small businesses will have to comply with a new overtime rule, estimated to affect 1.3 million workers. The new rule requires that exempt salaried employees must be paid at least $684 per week, or $35,568 annually. Employees who do not meet this salary level must be classified as non-exempt, and be paid overtime for all hours worked over 40 in a workweek.
Employers have two compliance options:
- Raise Salary. Employers can raise an employee’s salary to satisfy the new rule. Under this scenario the employee will remain exempt from overtime pay requirements. For example, if the employee was making $455 per week, the company would have to provide a raise of $229 per week.
- Convert to Non-Exempt. Some employers will choose to begin paying hourly wages and overtime rather than paying a higher salary. Under this scenario the employer must begin tracking hours so that the company can accurately compensate for all time worked, and all overtime due. (If the job requires more than 40 hours of work in a week, the company might choose to divide responsibilities among multiple employees to limit overtime liabilities).
Begin Planning Now
As it stands, the Trump Administration’s new rule will take effect on January 1, 2020. Accordingly, employers with exempt (i.e., salaried) employees who earn less than $35,568 must take action. For more guidance, check-out NFIB’s webinar on the New Overtime Rule here. Additionally, DOL provides compliance resource for small businesses here.
Finally, remember that to qualify for exemption from FLSA’s overtime requirements, an employee must be paid the salary level AND perform the appropriate exempt duties. To satisfy the exempt duties test, work must be:
- Executive – Primary duty is management of two or more full-time employees.
- Administrative – Primary duty is office or non-manual work related to business operation.
- Professional – Primary duty is performance of work requiring advanced knowledge.
- Computer Related – Primary duty is computer or program design.
- Outside Sales – Primary duty is selling products or services at the customer’s place of business or home.
For more information, check-out NFIB’s Guide to Wage & Hour Law.
*While the information provided is intended to be accurate, it is not legal advice. It is always prudent to consult with an employment law attorney in your state.
