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CLIENT ALERT: New Overtime Rule Raises Minimum Salary Requirements and Other Changes to the Fair Labor Standards Act

Today, the U.S. Department of Labor (DOL) issued its Final Rule updating the regulations under the Fair Labor Standard Act:

Effective January 1, 2020, employees who make less than $35,568 are now eligible for overtime pay under a final rule issued by the U.S. Department of Labor (“DOL”). The DOL expects 1.3 million workers to become newly eligible for overtime by updating the thresholds.  The new rule will raise the salary threshold to $684 per week ($35,568 annualized) from $455 per week. This means that even if your employee qualifies under one of the overtime exemptions, if the employee is not earning at least $684/week, the employee will be eligible for overtime and minimum wage requirements.

The new rule which revised the regulations issued under the Fair Labor Standards Act (FLSA) is expected to prompt employers to reclassify exempt workers to nonexempt status and raise the pay for others above the new threshold. 

In addition to raising the salary threshold for exempt workers, the new rule raised the threshold for highly compensated employees from $100,000 a year to $107,432 a year for full-time salaried workers. This means that employees classified as highly compensated for purposes of obtaining overtime exemption will now need to be paid at least $107,432/year.

The Final Rule also allows employers to use non-discretionary bonuses 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.

How does this affect Employers?

In order to comply with the Final Rule, employers will need to consider a few different options for employees classified as exempt but earn less than $684/week. Employers must review their roster of current exempt earners and, if they earn less than $684/week, the employers must implement one of the following options:

  • Beginning January 1, 2020, employers can remove the exemption status from these employees and begin paying overtime for all hours worked over 40 hours per week.

 OR

  • Beginning on January 1, 2020, employers can remove the exemption status from these employees, forbid overtime, and hire or reassign additional employees to cover any increase in workflow.

OR

  • Beginning on January 1, 2020, employers can increase the salaries of these employees to meet the minimum salary threshold of $35,568/year and at least $684/week, thus qualifying them for the overtime exemption.

Employers must weigh the cost of raising employee salaries above the new threshold against the cost of reclassifying employees as nonexempt and paying overtime. 

The ultimate decisions made by the employer should be strongly considered as any change in employee classification or reorganization of employee structure may impact employee morale. In addition, we view the “duties test” as even more important for employees whose salaries are on the border of the revised threshold. For these employees, it is now more important than ever before that employers ensure correct exemption classification and, if employers ultimately discover improper classifications, they should use this time as an opportunity to reclassify the exemption status for these employees.

If you have any questions about the changes to the Fair Labor Standards Act’s minimum salary requirements to qualify for overtime exemption status, as discussed in this Client Alert, or labor & employment, generally, please do not hesitate to contact one of the following members of the Brennan, Manna & Diamond’s Labor & Employment Team:  In Akron contact: John N. Childs at (330) 253-1946, Adam D. Fuller at (330) 374-6737, Richard L. Williger at (330) 253-3770, or Bryan E. Meek at (330) 253-5586, or Jeffrey C. Miller at (216) 658-2323 in our Cleveland Office; or John Gast (239) 992-1841 in our Bonita Springs, Florida Office; or Cody L. Westmoreland at (904) 366-2326 and Erin R. Whitmore at (904) 366-2324 in our Jacksonville, Florida Office.

CLIENT ALERT: Construction Law Update: Communication is Key! And Other Lessons Learned From A Recent Public Project Court Decision

In a recent decision, the Ohio Court of Claims entered a $2.2 million judgment in favor of the general trades contractor, and against a public university, in connection with an on-campus renovation project. Mid American Construction, LLC v. Univ. of Akron, Ct. of Cl. No. 2016-00685JD, 2018-Ohio-4513.

CLIENT ALERT: Ohio Incentivizes Cybersecurity Measures

On November 2, 2018, Ohio’s Data Protection Act (“DPA”) went into effect. The DPA incentivizes Ohio businesses to proactively address cybersecurity and data protection by providing an affirmative defense/safe harbor for claims related to data breach. However, the safe harbor is only applicable if the organization can prove “reasonable compliance” to the DPA.

CLIENT ALERT: Update on Discrimination

The “#metoo” presence and the recent Kavanaugh confirmation hearings have brought sexual discrimination issues to the forefront of the American mind. Always an incendiary and confusing topic, it also includes various permutations of issues involving sex, sex stereotyping, sexual orientation, and transgender situations.

CLIENT ALERT: Ohio Supreme Court Rules that a Subcontractor's Construction Defects are Not a Covered "Occurrence" Under a CGL Policy

Although a growing number of states have held that CGL policies provide coverage for damages caused by the defective work of subcontractors, the Ohio Supreme Court has refused to join the national trend. In Ohio N. Univ. v. Charles Constr. Servs., Inc., 2018-Ohio-4057, the Ohio Supreme Court recently ruled that a subcontractor’s faulty workmanship is not a covered “occurrence” under a typical CGL policy.

CLIENT ALERT: Taxpayer Passport Application will be Denied Due to Unpaid Taxes

In late 2015, Congress passed The Fixing America’s Surface Transportation Act (FAST) into law. This law allows the IRS and State Department to refuse to issue a Passport if the taxpayer has a seriously delinquent tax debt. The law also permits the IRS and State Department to revoke a taxpayer’s Passport for these same delinquent tax debts. To be considered a seriously delinquent tax debt, the tax debt must total more than $51,000.