Overtime Reform is Coming Soon

15 Clock Closeup

The DOL proposed changes to overtime pay and exemptions; it’s time to prepare. 

The Department of Labor (DOL) finalized changes to overtime regulations—a move that will change the exempt status of millions of American workers, making them eligible for overtime pay. 

Nextep is preparing clients for the planned changes leading up to the 2020 effective date. Employers need to plan now for how to handle changes to their employees’ pay. 

Here are the new overtime rules:

The new rule will be in effect on January 1, 2020.

The minimum salary threshold for classifying an overtime pay exempt employee will rise from $455 per week to $684 per week, equivalent to $35,568 per year. Employees must earn at least $35,568 per year under the proposed rule to even be considered exempt from overtime pay. Any previously overtime-exempt employee who meets the new requirements will now be eligible to earn overtime pay at a rate of 1.5 times their regular rate of pay.

Overtime exemptions are not determined by an employee’s pay alone. Employers need to review the employee’s primary duties and whether they fall into one of the DOL-approved exempt categories.

At this time, overtime-exempt categories include:

  • Executive
  • Administrative 
  • Professional
  • Computer employee
  • Outside sales
  • Highly compensated

Categories that are never exempt, no matter how highly compensated they are, include blue-collar workers and first responders. 

A person’s job title or pay rate alone is not enough to determine overtime exemption. It is important to carefully review the employee’s primary job duties with your HR business partner at Nextep to determine how to correctly classify them.

The DOL is not proposing changes to the exemption categories yet, but the definitions and classifications of these categories could change once the proposed rule is released. Use the DOL’s duties test to determine if an employee would qualify for overtime exemption based on their job duties. 

As we mentioned, the new rule will be effective on January 1, 2020. It can be difficult to plan for the financial implications of these changes and to determine whether an employee meets the requirements of the overtime-exempt duties. Nextep’s HR experts are here to help! Contact your Nextep HR business partner (HRBP) today for step-by-step planning.

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