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

Employee Safety During COVID-19: Compliance Toolkit

Employee Safety During COVID-19: Compliance Toolkit

Vaccines are coming to the rescue, but we’re not out of the woods yet. HR leaders can’t afford to take their eye off the ball when it comes to employee safety and compliance. Now’s the time to think about creating a vaccine policy that works for your organization, and it’s not too late to implement workplace testing. If an employee does test positive for COVID-19, you’ll want to make sure you’re ready to offer the right information and support to your whole team. Paycor is offering this free compliance toolkit, including customizable letter templates to use when you: Create a mandatory vaccine policy Implement workplace testing Inform your team that an employee has tested positive for COVID-19

Demotion Letter Template

Demotion Letter Template

There’s nothing better than seeing employees thrive, but setbacks and slips in performance do happen. One way to address performance problems is a demotion. Sometimes, it’s necessary to take a step back before you can take two steps forward. Download Demotion Letter Template When is a Demotion Necessary? In an ideal world, there wouldn’t be demotions. They are a sign something’s wrong: it could be that an employee has failed to respond to a performance improvement plan or they could just be disengaged. A demotion is the last stop before termination. If you believe the person has potential and is worth investing in, then a demotion might be the best way forward. Demotions are risky, though. You could end up with an employee who is even...

Maximum PTO Accrual Letter

Maximum PTO Accrual Letter

Encouraging employees to use their vacation days can feel strange. After all, nobody wants to leave themselves under-staffed and the rest of their team over-worked. On the other hand, what if employees rarely ever, or even never, take time off? That’s been a question facing business owners this year, as vacation plans were delayed, then cancelled, and PTO built up like never before.One problem is, PTO payout laws can turn unused PTO into an unwanted financial liability. There’s also a risk of schedule chaos down the line as everyone tries to use their days up at once. Most worrying of all is that employees who go too long without a break, even by choice, risk ending up disengaged and burned out. Download Sample Maximum PTO Accrual Letter...

How Long to Keep Payroll Records

How Long to Keep Payroll Records

Running a business, you know that compliance isn’t just about being compliant—you also need to prove it. You never know when the IRS, the DOL or the EEOC will demand to see your paperwork, which is why it’s so important to retain payroll records. To make things more complicated, each agency has its own rules for which documents you have to keep and for how long. The good news is, you don’t have to buy more filing cabinets. HR software can automatically store everything you need, with the added benefit of simplifying the whole payroll process. Why You Need to Retain Payroll Records At a federal level, you’re keeping payroll records primarily for three agencies: The IRS The Department of Labor (Wage and Hour Division) The EEOC These...