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New Overtime Rule Issued by US Department of Labor Really is a Big Deal

As of January 1, 2020, employees making less than $35,568 annually ($684 weekly) will be able to earn overtime pay due to the new rule that was just issued by the U.S. Department of Labor (DOL). This new rule will affect approximately 1.3 million U.S. workers: It's a big deal. 

The current salary threshold for exempt employees is $455 per week ($23,660 annually) and will be in effect until 1-1-2020, but it was almost doubled in the past during the Obama administration: A ruling was made against the DOL when it went beyond its authority during that time in a push to raise the salary threshold by double the amount but a federal judge blocked it and ruled it as being too high.

So, where does all of this leave employers? The new rule doesn't include automatic adjustments to the exempt salary threshold as it would have if it passed under the Obama administration. Adjustments will have to be made; no training will be needed for employees whose status will change from exempt to non-exempt. 

There are options available for employers to carefully consider going into 2020. Do you raise the threshold salary of exempt employees to the new rate or reclassify them as non-exempt and pay overtime? You will definitely need to do the math to see if your budget will allow the changes necessary to pay the newly classified employees overtime as per the Federal Fair Labor Standards Act (FLSA) that states: employees must be paid a salary of at least the threshold amount and meet certain duties tests. If they are paid less or do not meet the tests, they must be paid 1 1/2 times their regular hourly rate for hours worked in excess of 40 in a workweek.

Beginning on January 1, 2020, employers have these options:
• Re-evaluate job descriptions;
• Remove the exemption status and pay overtime for work over 40 hours;
• Forbid overtime and change exemption status to non-exempt or bring in more employees to bridge the gap for sustaining workflow;
• Raise the salaries of exempt employees to the new minimum salary requirement of at least $684 per week to avoid overtime pay. 

It is fair to say this is not going to make a lot of employees or employers happy, but it does provide a long-awaited solution for clarity regarding overtime. This is a time to evaluate budgets, re-evaluate your employees before changing their status to ensure they do meet the certain duties tests requirements for those who are on the threshold.

Your Human Resources department has its work cut out for them during this pivotal time in history, and it can be a bit overwhelming, especially for small businesses that do not have an HR department to turn to. Stellaris Group in Roswell, Georgia has a growing team of HR personnel with extensive backgrounds and training in this broad-based field. They can help you to evaluate or re-evaluate your company's employment roster to help you to determine how you will handle the new changes for overtime pay and employee status classifications.

Reference and Duties Tests Outline:

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