New DOL Overtime Rule: FAQs
New DOL Overtime Rule: FAQs

New DOL Overtime Rule: FAQs

On September 24, 2019, the Department of Labor issued its final ruling to increase the minimum salary threshold for executive, administrative and professional exemptions from $455 per week ($23,660 annually) to $684 per week ($35,568 annually). The new rule goes into effect January 1, 2020.

To help HR leaders prepare for the new year and mitigate risk, our compliance team answered the most frequently asked questions around the new DOL overtime rule.

Q: What determines if an employee falls within one of the exemptions?

A: To have exempt employee status, there are three exempt employee requirements that must be met: The worker must be paid on a salary basis, make the minimum salary for exempt employees, and have job duties that are considered exempt. Fact Sheet 17A

Q: What are the significant changes employers must know about the final rule?

  • The salary threshold has increased to $684 per week or $35,568 a year;
  • Raises the total annual compensation requirement for highly compensated employees to $107,432.
    • The highly compensated employee must receive at least $684 per week on a salary basis, excluding the nondiscretionary bonuses and incentive payments;
  • Employers can use nondiscretionary bonuses and incentive payments (including commissions) to satisfy at least 10% of the salary test.
  • Revises special salary levels in us territories. In Puerto Rico, Virgin Islands, Guam and the Northern Mariana Islands increase t $455 per week, and in America Samoa to $380 per week.
  • Increases weekly salary threshold to $1,043 per week for the motion picture industry;

Note: The job duties test did not change.

Q: Who is covered by the FLSA?

A: Any employee that does not fit into the exempt category is considered a nonexempt employee. https://www.dol.gov/whd/regs/compliance/whdfs14.htm

Q: What if a state has established its own overtime rules?

A: In cases where an employee is subject to both the state and federal overtime laws, the employee is entitled to overtime according to the higher standard (i.e., the standard that will provide the higher overtime pay). Not all states have separate laws, but employers should consult their specific state laws to determine applicability.

Q: Can employers use bonuses to satisfy part of the salary level test?

A: Yes, one of the provisions allows employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary test.

Q: Does the Final Rule change how employers may use bonuses to satisfy the salary level for highly compensated employees?

A: A highly compensated employee must receive at least the new standard salary amount of $684 per week on a salary basis, without regard to the payment of nondiscretionary bonuses and incentive payments.

Q: How does the catch-up payment process work for employers?

A: If at the end of the calendar year pay period the salary paid plus the additional payments do not equal the standard salary, the employer would have one pay period to make up the shortfall.

Q: How should a company handle exempt employees that work prorated hours?

A: Exempt employees are not granted the protections of the FLSA and are therefore not entitled to overtime pay. If the employees meet the job duty classifications, and receives salary in excess of the 2020 threshold of $684/week, they are exempt. https://www.dol.gov/agencies/whd/overtimepay

Q: Does the FLSA rules include outside commissioned salesmen?

A: The FLSA classification for an outside sales representative requires that the individual primary duty be sales-related work and that such work be customarily and regularly performed away from the employer's regular place or places of business. The agency distinguishes between outside sales, and inside sales, and this exemption does not apply to inside sales staff. https://www.dol.gov/whd/overtime/fs17f_outsidesales.pdf

Q: Are home health agencies exempt from overtime rules?

A: Most home care workers must be paid at least the federal minimum wage and overtime. The relevant question is often who is responsible for making sure these workers are paid according to these FLSA requirements. Whether you are responsible for the worker being paid federal minimum wage and overtime depends on whether you are an “employer” as defined by the FLSA. https://www.dol.gov/whd/homecare/homecare_guide.pdf

Q: If an employee works more than 8 hours on a given day but less than 40 hours for the total workweek, is that employee entitled to overtime pay?

A: The Federal Department of Labor does not require overtime for hours worked over 8 in a day. However, there are states that have this regulation and you will want to verify the states overtime regulations.

Q: For highly compensated employees, can commission be included in the salary calculation? For example, how do we classify an individual who makes $40,000 base salary and $70,000 commissions?

A: The only change for highly compensated employees in 2020 is an increase in the required total annual compensation of $107,432 or more to meet the exemption, which includes at least $684 per week paid on a salary or fee basis. The weekly salary amount of $684 must be paid in its entirety. Employers may not use nondiscretionary bonuses and incentive payments (including commissions) to satisfy any portion of the weekly standard salary level for HCEs. Employers should consult DOL guidance in Fact Sheet 17H for details regarding total annual compensation: https://www.dol.gov/whd/overtime/fs17hhighlycomp.pdf

Download Our Free DOL QuickStart Guide for Employers

As your organization considers how to prepare and comply, we’ve created this guide which outlines the new ruling, provides tips to manage impacted employees and offers a checklist of key details to follow to mitigate risk.

Click here to get your copy.

More to Discover

How to Pay 1099 Employees

How to Pay 1099 Employees

As the gig economy grows more employers are looking to hire independent contractors (aka 1099 workers). But since paying independent contractors isn’t a walk in the park, many employers are looking for step-by-step instructions. Here’s a breakdown of everything you need to know: How Do I Pay a 1099 Worker? This subject is something you will need to discuss in detail with the person you’re hiring for the job. Often, they will have a written contract that stipulates how and when they should be paid. The two most common methods of payment are hourly and by the job or project. Some independent contractors — such as attorneys — prefer to be paid on retainer, which means you pay them a lump sum at the beginning of each month in return for a...

States with Salary History Bans

States with Salary History Bans

Requesting job applicants’ salary histories has been a pretty common practice for employers over the years. Recruiters and hiring managers often use this knowledge to exclude people from the candidate pool, either because the applicant is “too expensive” or their previous salary is so low, hiring managers think the person is poorly qualified or inexperienced.Businesses have also used previous salary information to calculate new hire compensation—a process that can perpetuate pay disparity between women and men. To address this inequality, several states and municipalities have enacted bans on asking for previous salary information, although laws vary in terms, scope and applicability. The states and territories that have enacted salary...

Case Study: Buy Sod

Case Study: Buy Sod

Buy Sod Inc. Partners with Paycor to Pay Employees & Maintain Tax Compliance “Because we’re a niche company, our administrators sometimes have trouble uncovering and implementing best practices. But when we partnered with Paycor they brought the expertise and thought leadership to help us overcome tough challenges like the new EEO-1 report. Paycor has the patience, knowledge and resources to help us stay ahead of problems and grow.” - Jennifer Hillard, Director of People and Culture Why Buy Sod Inc. Chose Paycor In 2002, three family businesses came together to create a network of sod farms that operate and distribute around the country. But with ten locations and eighteen different payrolls to process, Buy Sod Inc. struggled to...

Webinar: Compliance in 2020: What You Need to Know

Webinar: Compliance in 2020: What You Need to Know

A new year brings new compliance issues employers should be monitoring at the federal, state and local levels. To help your organization prepare for what’s ahead, our compliance team will outline key changes in 2020 and trends in the areas of payroll, tax and HR compliance.Speakers: Arlene Baker and James SchwantesArlene Baker is a Senior Compliance Analyst with over 40 years of payroll and tax experience. She’s a member of the National Payroll Reporting Consortium focusing on IRS compliance, and she’s been a member of the national and local APA for 25 years. In 2003, Arlene was awarded the Ohio Payroll Professional of the Year award. James Schwantes is a Compliance Analyst with a legal and tax background. Prior to working at Paycor in...