Payroll Alert: Many More Employees Will be Overtime Eligible Starting January 2020


The U.S. Department of Labor (DOL) issued a new final overtime rule on September 24, 2019 that increases the Fair Labor Standards Act’s (FLSA’s) salary-level threshold for white-collar exemptions from $455 per week ($23,700 annually) to $684 per week ($35,568 annually). This overtime rule goes into effect January 1, 2020 and is estimated to extend overtime protections to an additional 1.3 million workers nationwide who are currently ineligible under federal law.

Who is covered by the new overtime rule?

Generally, the FLSA applies to employees of enterprises that gross $500,000 or more annually, are engaged in interstate commerce, or are engaged in the production of goods for commerce. In addition to the general rule, employees of certain companies are also covered by the FLSA despite their amount of gross sales or business. These entities include hospitals, businesses providing medical or nursing care for residents, schools, and public agencies.

Under the FLSA, nonexempt employees must be paid time and a half for any hours worked more than 40 hours in a workweek. Meeting the salary threshold does not automatically make an employee exempt from overtime pay; the employee’s job duties also must primarily involve executive (primary duty is to manage the business), administrative (primary duty is office or non-manual work directly related to the management or general business operations) or professional duties (requiring advanced knowledge in a field of science or learning), as defined by the DOL. The DOL also makes exceptions to the overtime rule for employees that are primarily engaged in outside sales (regularly engaged away from the employer’s place of business in sales role) and computer employees (employed as computer systems analyst, computer programmer, software engineer or skilled worker in the computer field). Find more information about these tests on the DOL fact sheet.

Under the new final rule, there have been no changes to the longstanding DOL duties test. However, as of January 1, 2010, workers who make less than $35,568 per year must be paid overtime, even if they are classified as a professional or manager. Notably, nondiscretionary bonuses and incentive payments, including commission, may be used to satisfy up to 10 percent of the threshold salary level.

If, however, an employee does not earn enough in nondiscretionary bonus or incentive payments in a given year to retain their exempt status, the DOL permits the employer to make a “catch-up” payment within one pay period at the end of the year. This payment may be up to 10 percent of the total standard salary. Any such catch-up payment will count only toward the prior year’s salary amount and not toward the salary amount in the year in which it is paid.

Further, the special rule for “highly compensated employees” will now require such workers to earn an annual compensation of at least $107,432. This compensation level is equal to the 80th percentile of full-time salaried workers nationally. To be considered exempt as a highly compensated employee, the employee must also receive at least the new standard salary amount of $684 per week on a salary or fee basis (without regard to the payment of nondiscretionary bonuses and incentive payments).

What does the new overtime rule mean to employers?

Because the new rule will likely impact a company’s budget, employers should immediately begin planning for the implementation of the new overtime rule. It is particularly imperative that the company’s HR department understands the new rule so that they can determine which employees are exempt or non-exempt, then adjust payroll accordingly. Generally speaking, the new rule leaves employers with two options:

1) Give all nonexempt employees that make less than $35,568 a raise (or ensure an adequate qualifying bonus) to put them above the threshold, or

2) pay them overtime for all time they work in excess of 40 hours per week.

It is also important that the employer complies with its obligation to keep adequate records of employee status and time worked. Failure to do so may have serious implications, as it would put the company in violation of the FLSA, and potentially Ohio law as well.

This article is meant to be utilized as a general guideline for the Department of Labor’s new overtime rule. Nothing in this blog is intended to create an attorney-client relationship or to provide legal advice on which you should rely without talking to your own retained attorney first.  If you have questions about your particular legal situation, you should contact a legal professional.

Mark Turner and Cindy Menta can be reached at mt@gertsburglaw.com, or by phone at 440-571-7773. 

An audit of your policies can help you avoid the pain of lawsuits. The Gertsburg Law Firm now offers CoverMySix, a one-stop legal audit for your business, led by award-winning litigators and in-house counsel. CM6 minimizes your exposure to lawsuits, investigations, disgruntled employees and customers, and all the damage that comes with them. Schedule a confidential, no-cost CM6 Vulnerability Check with Gertsburg Law Firm’s CEO, who will walk you through the minefields in your documents and key processes and tell you how to fix them yourself. Call 440-571-7774 or e-mail cz@gertsburglaw.com to schedule your CM6 Vulnerability Check today. Newer or smaller companies will want to take advantage of CoverMySix for Small Companies and Startups complete legal documentation portfolio. Check out covermysix.com to learn about the full CM6 audit suite.


Share
  • Email
  • Next up: Many Reasons Why COSE’s New Benefit Option May Be a Good Fit For Your Business
  • More in HR
  • Many Reasons Why COSE’s New Benefit Option May Be a Good Fit For Your Business

    COSE’s new health benefit option may be a good fit for your business. Here are seven reasons why.

    The COSE Health and Wellness Trust, or COSE MEWA, is a multiple employer welfare arrangement designed as a self-funded benefit option for business owners with 50 or fewer employees. The COSE MEWA offers features and benefits that might make it a good fit for small businesses.

    RELATED: Read an overview of the benefits the COSE MEWA can bring to your business. 

    Here’s a closer look at seven specific benefits available to COSE members who participate in the COSE MEWA.

    1. ‘Solopreneur’ friendly

    While it’s true the plan is open to COSE/Greater Cleveland Partnership members with 50 or fewer employees, sole proprieterships are also eligible for the plan. This is a great alternative to plans offered through the Affordable Care Act (ACA).

    2. Plenty of flexibility

    The COSE MEWA offers many different plan options, including traditional copay plans and high deductible health plans with varying deductibles and coinsurance.

    RELATED: View all of the different plan options available under the COSE MEWA 

    3. Minimize typical fees

    The COSE MEWA is not subject to some of the ACA-mandated benefits and taxes and fees, so these savings are passed on to the business owner.

    4. Additional VIP benefits

    Ancillary benefits, such as dental, vision and life insurance can be added to the plan.

    5. Rate savings

    By using factors such as medical history, gender, age and location to set your rates, the COSE MEWA may be less expensive for your group than similar plans offered under the ACA.

    6. Plan protection

    The COSE MEWA maintains Medical Mutual stop-loss coverage to provide plan sponsors with additional protection from large financial losses.

    7. Prescription benefits

    Prescription drug benefits are included with every COSE MEWA plan.

    Questions?

    Want to learn more? Give us a call at 440-878-5930 or email us at cosebenefits@medmutual.com for consultation and advice on your healthcare options. And to learn more about the COSE MEWA, visit www.cosemewa.com.

    Share
  • Email
  • Next up: Maximizing Your Return on Intern
  • More in HR
  • Maximizing Your Return on Intern

    Patrick Britton from NOCHE spent time with NEOSA recently to share their expertise in planiing, launching and optimizing a tech company's internship program.

    Patrick Britton from NOCHE spent time with NEOSA recently to share their expertise in planiing, launching and optimizing a tech company's internship program.

    Listen here.

    Share
  • Email
  • Next up: Maximizing Your Return on Intern Part 2
  • More in HR
  • Maximizing Your Return on Intern Part 2

    Patrick Britton from NOCHE spent time with NEOSA recently to share their expertise in planiing, launching and optimizing a tech company's internship program.

    Patrick Britton from NOCHE spent time with NEOSA recently to share their expertise in planiing, launching and optimizing a tech company's internship program.

    Listen here.


    Share
  • Email
  • Next up: Maximizing Your Return on Intern Part 3
  • More in HR
  • Maximizing Your Return on Intern Part 3

    Patrick Britton from NOCHE joined NEOSA for the third and final installment of this internship podcast series. Patrick shared insight into how a tech company can build a successfull and mutually beneficial internship program.

    Patrick Britton from NOCHE joined NEOSA for the third and final installment of this internship podcast series. Patrick shared insight into how a tech company can build a successfull and mutually beneficial internship program.

    Listen here.


    Share
  • Email
  • Next up: Minority Contracting Programs See Record Year
  • More in HR
  • Minority Contracting Programs See Record Year

    For the first time in its 35-year history, the Minority Business Enterprise met and exceeded state purchasing goals in fiscal 2015. Certified minority-owned businesses represented more than 19 percent, or $228.5 million, of all eligible goods and services contracted by the state. The Ohio Department of Administrative Services (DAS) and Ohio Development Services Agency (DSA) are looking to build on FY15’s banner year for state minority contracting at this month’s MBE/EDGE Business Expo at the Ohio History Center. The Encouraging Diversity, Growth and Equity (EDGE) initiative builds on MBE by promoting access to state government contracts and business services for socially and economically disadvantaged businesses.

    For the first time in its 35-year history, the Minority Business Enterprise met and exceeded state purchasing goals in fiscal 2015. Certified minority-owned businesses represented more than 19 percent, or $228.5 million, of all eligible goods and services contracted by the state.

    The Ohio Department of Administrative Services (DAS) and Ohio Development Services Agency (DSA) are looking to build on FY15’s banner year for state minority contracting at this month’s MBE/EDGE Business Expo at the Ohio History Center. The Encouraging Diversity, Growth and Equity (EDGE) initiative builds on MBE by promoting access to state government contracts and business services for socially and economically disadvantaged businesses.

    The state threshold for purchasing is currently set at 15 percent of all government purchasing. The Ohio Department of Administrative Services (DAS) and Ohio Development Services Agency (DSA) will try to build on fiscal ‘15’s success at this month’s MBE/EDGE Business Expo at the Ohio History Center in Columbus.

    “State procurement professionals are interested in meeting Ohio minority-business owners one-on-one to discuss how we can work together to provide the goods and services the state requires,” DAS Director Robert Blair said in a statement.

    The state of Ohio is currently seeking MBE-certified businesses for products and services in the following categories: Agricultural equipment and supplies, ammunition, building maintenance supplies, cold storage and delivery, court reporters, educational equipment, electronic security equipment, equipment leasing, fire/security systems, funeral services, hearing officers, heavy equipment, inmate patient supplies, laboratory chemicals and supplies, laboratory testing, landscaping, medical professional services, medical specimen courier, medical supplies, medical transcription services, new vehicles, pest control, physicians, printing, police and fire safety supplies, program analysis and evaluation, property management, psychiatrists, psychologists, refuse pickup and disposal, security guards, small engine repair services, vehicle parts and accessories, vehicle repairs and service, timber harvesting, watercraft equipment and supplies, and window washing.

    The MBE/EDGE Business Expo will be held October 27 from 9 a.m.–1 p.m., at the Ohio History Center, 800 E. 17th Ave., in Columbus. Admission and parking are free.

    The state is encouraging participants to register online at das.ohio.gov/eod by October 22, though walk-ins are welcome. Information on MBE and EDGE is also available at the website, or by calling 614-466-8380.





     

    Share
  • Email
  • More in HR