New Department of Labor (DOL) overtime rules went into effect on January 1, 2020. These rules will adversely impact all companies with both exempt & nonexempt classes of employees, Companies will be faced with major challenges in the implementation and impact of these new rules. Here are some simple guidelines on the implementation & impact of these new DOL rules.
The Rules in Summary:
- Employees must earn a minimum of $684/week $35,568/ per year to be classified as Exempt from overtime. This is an increase from $455/week $23,660/per year.
- Exempt employees must also meet the duties test of generally performing tasks that require:
- Discretionary powers
- Independent judgment
- Highly compensated employees earning $107,432/per year up from $100,000/per year are exempt
- Exempt employees are paid the same salary each calculated period without regard to quantity or quality of work
Implementation will require:
- Review & revision of:
- Job Descriptions
- Employee Handbooks
- Policies & Procedures
- Determination of employees that remain exempt under the new rules
- Determination of employees that must be switched from exempt to non-exempt under the new rules
- Determination of employees that must be switched FRP, non-exempt to Exempt under the new rules
Impact of these Rules:
- Some changes will be easily apparent.
- Borderline cases will present greater challenges
- Cultural and employee relations impact of these rules will present critical challenges
- Increased payroll costs from overtime payments to a greater number of employees classified non-exempt
- Increased administrative & payroll processing costs
- Potential for employee issues based on re-classification
- Potential for employee complaints to the Dept of Labor
- Requirement for greater information & communication to employees
This is merely a summary of the events companies will face in the implementation and impact of the new DOL overtime rules. They went into effect on January 1, 2020. They have been contemplated since 2016. Companies must start the arduous implementation and deal with the impact of the new rules and all of its procedural and cultural nuances.
Payroll is a primary area of personal expertise. I have conducted seminars nationally & internationally on payroll in addition to years of payroll operational experience and welcome the opportunity to assist you in the implementation of these new overtime rules.