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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.

Vaccination Considerations for Employers

Today, three Covid-19 vaccines have tested as highly effective (90%+ efficacy) and are advancing in the process for emergency use. This is especially welcome news in Ohio, which has skyrocketing cases and our strategic response has been to turn the entire state into the small town of Bomont with strict curfews and bans on social gatherings.

Did You Receive More than $750,000 in Provider Relief Funds?

The Provider Relief Funds (“PRF”) - authorized under the CARES Act - has been a vital tool for health care providers during the COVID-19 public health emergency. These funds have allowed providers to stay open and continue to offer care during these pressing times. While helpful, these funds do come with several important obligations. First, fund recipients are required to comply with certain record-keeping requirements as well as comply with certain balance billing prohibitions. See our Client Alert. Second, fund recipients are required to report their intent, use of funds, and other data elements, which helps promote transparency to the federal government. Please see our Client Alert on provider relief fund reporting requirements. Third, and perhaps a new concept for many providers, fund recipients of more than $750,000 must undergo a “single audit” to ensure program compliance and appropriate use of funds.

Important Updates Every Provider Should Know: Information Blocking

In December 2016, Congress passed the 21st Century Cures Act (“Cures Act”) which: (1) authorized funding for the National Institutes of Health to promote medical research and drug development, (2) implemented provisions aimed at addressing the prevention and treatment of mental illness and substance abuse, and (3) reformed certain standards of the Medicare program and federal tax laws to foster healthcare access and quality improvement.

PPP Update: Loan Necessity Questionnaires

On October 26, 2020, the Small Business Administration (“SBA”) published a notice in the Federal Register which foreshadowed the release of two new forms seeking information from for-profit and nonprofit organizations that received Paycheck Protection Program (“PPP”) loans of $2 million or more. If approved, the SBA would use information from these forms to evaluate and determine whether economic uncertainty made a PPP loan request necessary.

Exposure to COVID-19 Flow Chart

Exposure to COVID-19 Flow Chart