New Federal Overtime Rules

09.24.2019 Written by: Henningson & Snoxell, Ltd.

…and yes, they complicate complying with Minnesota’s Recent Wage Theft and Recordkeeping Laws.

Businessman, employers

It’s official.

As a quick historical recap, back in 2016 the U.S. Department of Labor announced a final rule to change the overtime thresholds. Many businesses and nonprofits made significant changes to their employees’ salaries and exemption status to meet the requirements of the 2016 final rule.  At what seemed liked the last minute, the 2016 final rule was subsequently invalidated by the U.S. District Court for the Eastern District of Texas on November 22, 2016.  Due to the Court’s action, the U.S. Department of Labor has continued to enforce the existing rule and levels from 2004.

Throughout 2019 the U.S. Department of Labor asked for public comments and feedback regarding the overtime threshold, thereby foreshadowing a rule change in 2020. Today (9/24/2019), the U.S. Department of Labor announced a final rule to update the earnings thresholds necessary to exempt executive, administrative and professional employees from the Fair Labor Standards Act minimum wage and overtime pay requirements. The final rule is effective on January 1, 2020.

More specifically, in the final rule does the following:

  • raises the “standard salary level” from the currently enforced level of $455 per week to $684 per week (equivalent to $35,568 per year)
  • raises the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year
  • allows employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level
  • revises the special salary levels for workers in U.S. territories and the motion picture industry

What does this mean for employers?

Employers should immediately prepare for the new final rule by reviewing the requirements, evaluating their current classification of employees (exempt and nonexempt), and determine if reclassification of their employees is required. Given the new requirements, many employers will likely need to engage in the reclassification of exempt workers to nonexempt status, along with raising pay to meet or exceed the new threshold.

For Minnesota employers, it is also important to review this new rule along with Minnesota Wage Theft and Recordkeeping Requirements. Minnesota employers must provide written notice (Minn. Stat. §181.032) to an employee of their employment status which includes their exempt or nonexempt status. If you aren’t familiar with Minnesota’s Wage Theft and Recordkeeping Requirements, you can click the following link to reference our firm’s publication “Minnesota Wage Theft Law: Must-Knows and Must-Dos.”

Confused? Overwhelmed?

The attorneys at Henningson & Snoxell, Ltd. are here to help. Our attorneys are here to serve as trusted legal advisors and ready to help your business, nonprofit or church through these complex issues. From helping your organization understand employment classifications to creating the necessary procedural infrastructure to achieve and maintain compliance, we are here to assist your team with its legal needs.

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