Fitzgibbons Law Offices - Casa Grande and Maricopa Lawyers

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Denis Fitzgibbons, Casa Grande Employment Attorney

 

Fitzgibbons Law Offices
1115 E. Cottonwood Lane
Suite 150
Casa Grande, AZ 85122

Employment Law

March 2019

Labor Department Announces New Overtime Exemption Rules

In a move that will affect many employers, the U.S. Department of Labor recently announced a 50% hike in the minimum salary requirement for administrative workers to be exempt from overtime pay.

Whether workers are exempt from overtime or non-exempt depends, in part, on their duties. Executive, administrative and professional employees are generally considered exempt. However, in addition to satisfying the “duties test,” to be exempt under current rules the employee must be paid a salary of at least $23,660 a year ($455/week).

If the Labor Department's proposed change is enacted as expected in early 2020, the minimum required salary for overtime-exempt employees will increase by nearly 50%, to $35,308 per year ($679/week), and many employees who are currently exempt may soon be entitled to overtime pay. The Labor Department estimates that the increase will make more than a million additional American workers eligible for overtime.

While the proposed hike is lower than the increase that a federal judge blocked in 2016, the impact is significant nevertheless.

See also: "Notice of Proposed Rulemaking: Overtime Update" (U.S. Dept of Labor)

Example. You pay an exempt administrative employee a $500 weekly salary. In an average week, that employee works 50 hours. Under the new rules, that employee’s $500 weekly salary will be $179 below the $679 weekly minimum to qualify for the overtime exemption and would become eligible for overtime pay. If the employee continues to work 50 hours a week at $12.50/hour ($500 divided by 40 hours), that employee will be entitled to 10 hours of overtime pay at $18.75/hour, raising their weekly pay to $687.50.

Plan Ahead

To prepare for this change, employers should consider a number of steps.

• Determine whether employees treated as exempt, based on their job description and duties, really are exempt. If they do not satisfy the duties test, change their status to non-exempt.

• If an employee meets the duties test but is not close to the new salary minimum, consider whether you will raise their pay so they will continue to be exempt. If the employee does not regularly work more than 40 hours a week, it may be less expensive to pay overtime rather than increase their pay rate.

• For a currently exempt employee who works a lot of hours but whose base weekly salary is less than $679, determine whether to lower their hourly rate so that, with overtime, they will continue to earn roughly the current amount.

• Be more diligent in limiting overtime and determine which employees can be capped at 40 hours.

• Finally, to avoid excessive overtime for non-exempt positions, consider adding full- or part-time employees.

 

Fitzgibbons Law Offices attorney
Tina Vannucci contributed to this article.

 

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