Earlier this year, HR Legalist updated readers about a proposed rule unveiled by the Trump Administration’s Department of Labor (“DOL”) that would increase the salary threshold, under which all employees must be paid overtime wages, to over $35,000.  On September 24, 2019, the rule was published in the Federal Register, triggering a tight deadline for employers to meet the new salary requirement.

Since 2004, the threshold was set at approximately $23,600 per year. The new rule will increase the threshold to $35,568, or $684 per week. Notably, this increase is approximately $12,000 less than that of a prior rule proposed by the DOL during the Obama Administration (which was blocked by the courts and later abandoned). While the rule has garnered criticism from many who see it as too employer friendly, it is estimated to make approximately 1.3 million additional workers eligible for overtime. Critics have hinted that litigation is on the horizon, but a successful challenge to the rule appears to be a long shot.

The more immediate concern for employers is the fact that the rule takes effect on January 1, 2020, leaving little more than three months in which to ensure compliance. In order to do so, employers must determine which exempt employees fall below the new threshold, and decide whether any such employees should either be given a raise or reclassified as nonexempt employees entitled to overtime pay. In a bit of a reprieve, however, the new Rule leaves intact the “job duties” portion of the test for exemption leaving employers with only one major change to adapt to.  An employee’s salary should only be raised above the new threshold if the employee’s job also satisfies one or more of the duties tests. Simply paying the employee in excess of the new threshold and calling them a “manager” or “supervisor” does not necessarily make them exempt from the right to collect overtime pay if they work over 40 hours per week.

As always, misclassifying non-exempt employees as exempt presents a costly legal risk that can be difficult to defend against. Employers should utilize this new rule change as an opportunity to comprehensively review and assess their pay practices. Any questions or concerns should be directed to an attorney with experience in this highly technical area of the law.

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