As of January 2020, the first update of significance to the Fair Labor Standards Act (FLSA) guidelines in over 50 years will lead to some fundamental changes in how overtime is calculated. In turn, employees can expect more perks, and a higher proportion of the workforce can expect to receive payment for overtime.
Around 1.3 million people will be newly eligible to receive a higher rate of pay for time worked more than 40 hours a week. Read on to discover details about how these changes could affect you.
What Are the FLSA Overtime Rules?
The FLSA was a piece of legislation first devised in 1938 to guarantee workers a minimum wage. It also dictates the right for eligible persons to earn 150% (time and a half) of their regular payments for work carried out in excess of 40 hours a week. The changes that come into effect on January 1, 2020, define what constitutes regular wages as well as raising the earnings threshold to make more US citizens eligible for overtime pay.
Raised Standard Salary Level
Previously, the FLSA set the pay grade that determined eligibility for overtime pay at less than $455 per week or $23,660 per year. The new ruling means that beginning in January, you’ll qualify to make time and a half if you earn $684 per week or $35,568 per year or less. This number represents the 20th percentile of salaries. There are a few notable exceptions or exemptions, and they are detailed below.
Change in Definition of Highly Compensated Employees
From January 1, the upper limit for the exemption for highly compensated employees will increase from $100,000 per year to $107,432 per year. Under this exemption, the highly compensated employee’s total annual pay can include commission and nondiscretionary compensation, including bonuses. That said, even if your total yearly remuneration is over the threshold, you still need to earn more than $684 each week throughout the year.
Bonuses
One of the specifications of the new ruling states that employers can use nondiscretionary incentives and bonuses to constitute up to 10% of your regular wages. This translates as needing to earn upwards of $32,011 in non-bonus pay to be deemed exempt from the updated FLSA overtime rules.
Weekends and Holidays
The FLSA doesn’t deem work carried out on Saturdays or Sundays or during holidays as entitling you to overtime pay. Some states have their own laws on this matter, so be sure to double-check local legislation. If the state you live in has a law that is more favorable to you, the worker, it takes precedence over the FLSA guidelines — likewise if it’s the other way around and the federal ruling is more beneficial than state law.
Exemptions
- Managers: If you’re responsible for the management of two or more employees and the primary function of your role is managing the business, you can be deemed salary exempt. However, if you have the power to hire and fire but spend the majority of your time doing the same work as the staff, the chances are you won’t qualify for the exemption.
- Administrative: This doesn’t mean anyone in an admin role — the majority of administrative assistants are almost all nonexempt. The exemption applies to professional administrators such as those in IT, finance or HR.
- Professional: Certified public accountants, attorneys and doctors are included in this bracket. Additionally, creative people and educated professionals who work independently also fall under this category.
- Outside Sales: If you’re a salesperson and the majority of your time is spent outside the office meeting clients, you’re likely exempt. Those who work in an office or call center selling a product or service are almost always nonexempt and entitled to overtime pay, provided they fall into the salary bracket.
Examples of State Variations
Some states deviate from the FLSA guidelines. Often, this is to delineate additional workers as nonexempt — or entitled — to overtime pay. Nevada, Colorado, California and Alaska are examples of such states. These states have a mandate for daily overtime than applies to nonexempt employees. Most states stay in line with the FLSA guidelines, but it’s still a good idea to check yours and make sure. Some notable examples of states that differ include:
Maine
With regards to white-collar workers — professionals, administrators and managers — Maine sticks to the FLSA guidelines. However, Maine’s minimum salary level is much higher than the federal minimum wage. As such, the exemption starts at $36,000 instead of $35,568.
California
California has unique exemption requirements for those working as licensed surgeons and physicians, as well as computer software employees. The state-mandated duties and salary tests must be met in this state, but the minimum salary threshold is significantly higher. If your employer’s business has more than 26 employees, your minimum salary is $54,080, and if it’s 25 and under, you’re looking at $49,920.
New York
New York has relatively complex exemption laws. For example, the minimum salary for exempt administrative and managerial employees is $1,125 per week. There is no minimum salary level for exempt professional employees. Additionally, Nassau, Westchester and Suffolk counties have different salary level than the remainder of the state.
Summary of Significant Changes
- These amendments to FLSA overtime guidelines take effect as of January 1, 2020.
- Up to 10% of nondiscretionary incentive and bonus payments, including commissions, can be included in the minimum wage level.
- The FLSA raised the annual pay threshold for highly compensated employees from $100,000 per year to $107,432 per year.
- The minimum salary level for white-collar workers has risen from $455 per week ($23,660 per year) to $684 per week ($35,568 per year).
If you’re curious to find out more about the recent updates to FLSA overtime legislation, call Diversified Employee Solutions; an HR outsourcing firm at 330-764-3193.
