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Is Your Business Ready For The New FLSA Overtime Law?

2020 Mississippi and Federal Labor Law Poster Set Laminated

The Department of Labor has recently released a new ruling concerning the Fair Labor Standards Act that could affect you and your place of business. The Fair Labor Standards Act sets mandatory guidelines concerning minimum wage, overtime pay, recordkeeping and child labor for most federal, state and local places of business.

If a business is governed by the FLSA, the employee is classified as either “exempt” or “non-exempt.” Whether you are exempt or not depends on these three criteria: how much you are paid, how you are paid, and what kind of work you do. If you are labeled as a non-exempt employee, you are entitled to overtime pay and are paid a salary wage.

The Fair Labor Standards Act made a major change regarding minimum wage and overtime pay, that takes effect January 1, 2020:

The salary threshold (minimum wage for salaried employees) is set to be raised to $684 a week (from the previous amount of $455 a week), thus making more employees eligible for overtime pay and could cause some employees to be reclassified as non exempt. Any exempt employee who currently earns a weekly salary that is less than $684 per week could be impacted by this new rule.

Other important changes:

There are other various salary threshold increases. The threshold for highly compensated employees increases to $107,432 annually. The special salary threshold in U.S. territories will increase to $455 per week (except American Samoa, where the special salary will remain at $380 per week).

Employers can now use non discretionary bonus and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level, in recognition of evolving pay practices. For example, an employer who pays a 5% bonus annually to an employee can count that 5% toward the minimum salary threshold.

What should a business/employer do?

  • Reconsider employee classifications and compensation. Identify any employees who could have a change in their exempt or nonexempt status based on the new standard and consider how to apply these rules in terms of their duties as well as their salary. Remember, meeting the salary threshold is just one piece of the exemption requirement for classifying workers as exempt. The final rule issued by the DOL only modifies the Salary Level Test. If all your employees are paid a salary and that salary is greater than $684 per week ($35,568 annually) you probably won’t be affected by this rule. However, businesses with employees who receive a salary in excess of the current minimum but less than the minimum come January 2020. will need to take additional steps.
  • Reevaluate overtime policies to ensure appropriate record-keeping, efficient use of overtime and compliance with applicable laws.

According to the Department of Labor, the FLSA provides minimum wage and hour standards, and does not prevent a state from establishing its own protective standards. If a State establishes a more protective standard than the provisions of the FLSA, the higher standard applies in that State.

Follow these simple guidelines and yes, your business can be ready for the new FLSA Overtime Law.

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