On September 24, 2019, the U.S. Department of Labor announced that effective January 1, 2020, the salary threshold for an employee to be exempt from overtime under the administrative, executive, professional, and computer exemptions of the Fair Labor Standards Act will increase from $455 per week to $684 per week (or $35,568 per year).
For employers, this new threshold means that employees who are currently exempt and earn a salary of less than $684 per week will, in most cases, become non-exempt. The change is expected to impact an estimated 1.2 million workers.
Other less significant (but still important) changes the DOL announced (also effective January 1, 2020):
• Raising the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year;
• Allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices; and
• Revising the special salary levels for workers in U.S. territories and the motion picture industry.
Employers only have a little more than three months to get their FLSA houses in order. If an employer has exempt employees earning a salary of less than $684 per week (which is not all that uncommon in small businesses, retail establishments, restaurants, schools, and non-profits), it needs to determine whether to gross them up to the minimum salary threshold to maintain their exemption, or convert them to non-exempt hourly employees who are overtime eligible. If an employer does not know how many hours its potentially impacted employees work on a week-to-week basis, there is no way to know whether to gross them up to maintain their exemption or convert them to non-exempt status. In other words, now is the best time to audit your wage and hour practices.
Employers cannot afford to sleep on this issue and take a chance of having improperly classified employees post-January 1, 2020. Wage and hour litigation continues to be one of the hottest areas for class action lawsuits and it is a significant potential liability for organizations of all sizes. The time to examine this issue and fix it is now, and it is quickly ticking away.
For more information about this significant change in wage and hour law, or to discuss an audit of your wage and hour, or other employment practices, contact Meyers Roman’s employment lawyers at the email addresses below:
Seth Briskin, email@example.com
Jon Hyman, firstname.lastname@example.org
Lester Armstrong, email@example.com