Employee Overtime Exemption Changes for 2020

Employee Overtime Exemption Changes for 2020

What Florida Business Owners Need to Know About the Changes to Overtime Exemption Eligibility Coming in 2020

The United States Department of Labor has announced a new rule concerning employee overtime exemption that will change how Florida businesses can classify exempt and nonexempt executive, administrative, and professional (EAP) employees. Starting on January 1, 2020, the Department will raise its minimum salary requirements for overtime eligibility. This is the first change of its kind in fifteen years. An estimated 1.3 million workers are eligible under the new rule.

Who Does the New Rule Apply To?

All businesses subject to the Fair Labor Standards Act (FLSA) should be aware of the Department of Labor’s new rule. Once in effect, employees making less than $35,568.00 a year will become eligible for overtime pay, as will highly compensated employees earning less than $107,432.00 on an annual basis. Employers can use nondiscretionary bonuses and other incentive payments, such as commissions, to account for a maximum of 10% of an employee’s base salary. However, these payments must happen at least once per year. Discretionary payments such as end-of-year bonuses do not count towards the total salary.

What Steps Does My Business Need to Take?

If your business has any employees currently exempt from the FLSA’s overtime requirements, then you should immediately gather compensation data for workers under the $107,432.00 threshold. Next, review your budget and any employment agreements while keeping an eye out for any positions that could be restructured, reclassified, or given a salary increase to meet the new requirements for 2020. Then, calculate whether it will be more cost-effective to raise employee salaries or to reclassify their positions and pay over time. Now put your plan together and act on it fast – January 1st is rapidly approaching!

What Happens if I Don’t Meet the Salary Cap?

Employers who miss the threshold for a year can make a final “catch up payment” to stay compliant. This catch-up payment is a one-time payout that you can give your employees to meet the new rule’s standard. However, you only have until the first pay period following the year in question. Otherwise, you’ll have to pay them that year’s overtime.

Does the Department of Labor’s new rule have you wondering if you should get those outdated employment agreements reviewed? Our firm provides employment agreements for hourly, salaried, and executive employees. You can schedule your consultation online or by calling (727) 279-5037.

Image Source: Unknown Title by STIL from Unsplash.

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