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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.

UPDATE: Governor Dewine Signs HB 606 Granting Short Window of Immunity from COVID-19 Personal Injury Lawsuits

The Ohio General Assembly, in Am. Sub. H.B. No. 606, is in the final stages of passing a law that will prohibit lawsuits seeking damages from COVID-19. This includes injury, death, or loss to person or property if the lawsuits are based, in whole or in part, on the exposure to, or the transmission or contraction of the coronavirus, unless the defendant in the lawsuit acted intentionally or recklessly. In circumstances where this immunity does not apply, H.B. 606 prohibits such claims being aggregated and brought as a class action.

Revised Department of Labor FFCRA Guidance, Effective September 16, 2020

In response to attacks on the legality of the Department of Labor’s (“DOL”) Final Rule regarding the Families First Coronavirus Act (“FFCRA” or the “Act”), which took effect in April 2020, the Department of Labor issued new guidance on Friday, September 11th to formally address ongoing questions and concerns related to the COVID-19 legislation.

FCC Adds $198 Million to Strengthen Telehealth for Rural Healthcare Providers

The Federal Communications Commission (“FCC”) has added an additional $198 million in funding to its Rural Health Care Program. These funds will be used to increase broadband services and telecommunications to bolster telehealth/telemedicine services for rural healthcare providers. Funding for rural healthcare providers was initially capped at $605 million in 2020, but the added funds will now allow the FCC to provide over $800 million to eligible providers.

Finding Opportunity in Adversity: Optimism for the Construction Industry

Looking for good news? If so, you are not alone. Aside from the collective mental, physical and emotional human toll imposed by the COVID-19 pandemic, entire sectors of the economy have been ravaged, and old, familiar ways of doing business have been disrupted. Although deemed essential, the construction industry has not been immune to interruption and uncertainty during these unprecedented times. Amid new health and safety concerns, coupled with financial uncertainty, progress on projects has slowed, and the start dates for a number of new projects slated to begin in 2020 have been deferred. However, resilience has always been a trademark of contractors, subcontractors and other industry professionals. Reports indicate that while the construction industry lost more than one million jobs February through April, at least 600,000 of those jobs had been gained back by the end of June.

Yard Sign Do’s and Don’ts: How to Avoid Legal Challenges to Municipal Sign Codes this Election Season

As the nation heads into the tail end of the 2020 general election, municipalities will inevitably face challenges as they seek to regulate the seasonal proliferation of yard signs on residential property. While the matter may seem trifling, a seemingly benign yet content-based sign ordinance can result in significant legal exposure for municipalities that have not heeded recent Supreme Court decisions on content neutrality.