New Overtime Rules Effective January 1, 2020

Welcome to 2020! A new decade, a fresh start, and new overtime rules for non-exempt employees. Beginning January 1, 2020, under the Fair Labor Standards Act, the minimum salary an employee seeking to qualify for the executive, managerial, professional and outside sales overtime exemption must earn to be eligible for exemption from overtime pay increases to $648 per week, or $35,568 annually. Any employee working more than 40 hours per work week who earn less than $648 per week must be paid overtime for all hours worked over 40 in a work week.

In addition to the new minimum salary requirements for executive, managerial, professional and outside sales employees, the “Highly Compensated Employee” exemption threshold will rise from an annual salary of $100,000 to $107,432.

However, the increase in the minimum threshold does not change the requirement that the employees also meet the duties test. Salary is just one part of the test to determine if an employee is exempt. If your employee meets both the salary requirements and the requirements of one of the following categories, the employee can be classified as exempt from overtime:

    • Executive: An employee who manages a recognized department of the business with two or more fulltime employees (or their equivalent) and has duties that are primarily managerial, the employee may be exempt from overtime. The ability to hire and fire staff is not, in and of itself, sufficient to demonstrate managerial capacity. If the employee’s key job functions are the same as the employees he or she supervises, the employee is probably not eligible for the exemptions.
    • Professional: Highly educated professionals who work independently fall into this category. This can include doctors, attorneys, certified public accountants, other educated professionals who work independently, and creative people. To qualify, the employee’s primary duty must be the performance of work requiring advanced knowledge usually acquired through a lengthy course of specialized instruction. The work must be predominantly intellectual in character and require the consistent exercise of discretion and judgment.
    • Administrative Professionals: This category does not include administrative assistants, but does include employees providing administrative functions such as IT, finance, and human resources. This category includes employees whose primary duty is performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers. The employee has to be able to exercise discretion and independent judgment with respect to matters of significance.
    • Outside Sales: An employee whose job is outside sales may be exempt if their primary job duty is making sales or obtaining orders or contracts and the employee regularly does their job away from the employer’s place of business. Outside sales people are required to do the majority of their work outside of the office.

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