My Benefit Advisors Ask the Experts: Preparing for New Overtime Thresholds

Question: What should employers do to prepare for the anticipated January 1, 2020, effective date of new DOL white collar exemptions?

Answer: On March 7, 2019, the U.S. Department of Labor (DOL) announced a proposed rule to update and revise Fair Labor Standards Act (FLSA) white collar exemptions by raising the salary level for an exemption from $455 per week ($23,660 annually) to $679 per week ($35,308 annually), among other changes.

The rule is expected to be adopted and become effective January 1, 2020. While it’s too early to make any actual changes in response to the proposal, it’s a good idea to start preparing now so you’ll be ready if it becomes law, as experts anticipate it will.

• Analyze cost impacts. You can begin to determine which employees are classified as exempt and earn $35,308 per year or less. Estimate the increased costs of either increasing their salaries to $35,308 per year or reclassifying the employees as nonexempt and paying overtime when they work more than 40 hours per week (or overtime hours worked based on your state’s overtime laws). Again, hold off on any actual changes until the proposal becomes effective.
• Review job descriptions. Take a look at your organization’s job descriptions to ensure that they are accurate for the work that the employees actually perform. Update as needed. Review the classifications as exempt or nonexempt based on the “job duties test” as defined by the DOL.
• Forecast overtime. Talk with the impacted employees and their managers to get an estimate of how much overtime per week they actually work.
• Review your overtime policies. While employers must pay overtime per federal and state laws even if the overtime is not authorized, employers can limit the amount of overtime allowed and provide disciplinary action to employees who fail to follow policy.
• Measure productivity. Now that some exempt employees may be reclassified as nonexempt, ensure that the extra hours worked result in measurable productivity. Many exempt employees did not track hours worked previously and may have worked longer hours when not absolutely necessary. Since that time will now be compensable time, employers should ensure that the overtime is warranted based on business demand.
• Review meal and rest break rules. Those employees who will be reclassified as nonexempt will be required to comply with state or company mandated meal and rest break requirements.
• Review employee communications regarding policies, the enforcement of such policies, and how you will communicate these changes to those employees who will be affected by the change in status.

SCCCC Member Contact: Jim Pitts, My Benefit Advisor, LLC