The DOL’s new overtime rule takes effect on January 1, 2020. Here’s what to expect and how to prepare.
It’s finally happening. On September 24, 2019, the Department of Labor (DOL) announced the new overtime rule—set to take effect on January 1, 2020.
We’ve written about it again and again and again (20 times, to be exact) over the past four years. And if that seems like a long time and a lot of updates, keep in mind the DOL discussed the topic for over a decade. The current rule was updated in 2004. This long-awaited update accounts for the steady and not insignificant increase in employee earnings since that time.
What to expect from the new overtime rule
The new rule increases the overtime salary threshold from $23,660 per year ($455 per week) to $35,568 per year ($684 per week). That makes an additional 1.3 million American workers eligible for overtime pay.
It’s not the $46,476 annual threshold promised in 2016. But along with the new overtime rule, the DOL announced its intention to update the salary threshold on a more consistent and ongoing basis. So don’t expect to wait another 15 years for the next increase.
But wait—there’s more! The new rule also:
- Raises the total annual compensation requirement for “highly compensated employees” from $100,000 to $107,432.
- Allows employers to use annual or more frequent nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary level.
- Revises special salary levels for workers in U.S. territories and the motion picture industry.
How business owners can prepare for the new overtime rule
It’s really happening this time. They promised. So it’s time to start taking some of that advice we offered up back in 2016.
1. Review overtime, scheduling, and employee exemption policies. Some employees will need to be reclassified as nonexempt from overtime pay. But remember that employees making more than $35,568 per year aren’t automatically considered “exempt.” An employee’s job duties must also primarily involve executive, administrative, or professional duties, as defined by the DOL. Learn more about salary and duties tests on the FLSA website.
2. Start tracking employee time, like, yesterday. According to labor experts, tracking time is the best way to prepare for regulatory changes and avoid future wage and hour lawsuits. TSheets time tracking helps employees and employers keep tabs on overtime hours and maintain a real-time audit log. With accurate employee time data, you can make sound decisions about employee classifications.
3. Make any necessary changes to employee classifications before January 1, 2020. Don’t get hit with a costly wage and hour lawsuit. Overtime violations are among the most expensive and most common wage and hour violations, accounting for 83% of the money recovered from wage and hour lawsuits.
When in doubt, it’s always wise to consult with a legal advisor regarding the specific requirements of the Fair Labor Standards Act and how they impact your business.