For today's weekly cavnesHR newsletter, we are going to talk about a recent ruling by the Department of Labor, where they changed the salary requirements for overtime. So some background on this. For the past few years going back to President Obama's administration. The Department of Labor has been going back and forth on changing the salary requirements for overtime.
They actually changed it a few years ago. But a Federal Judge ruled that they had overstepped their Federal mandate, by making the salary requirement too high. So a couple of days ago the Department of Labor finally changed the salary requirements for overtime. This new rule is going to go into effect on January 1, 2020. So businesses, especially small business doesn't really have a lot of time to react to this.
The new ruling by the Department of Labor says employees who make less than $35,568 are eligible for overtime pay starting January 1, 2020. To be exempt from overtime pay under the federal Fair Labor Standards Act, employees must be paid a salary of at least a threshold amount of $35,568 and meet certain duty tests.
We'll go over those tests in a future newsletter. If they are paid less than this, they have to be paid time and a half. This new rule raises the threshold from $455 a week to now $684 a week. Previously, the annual salary was $23,660. It is now $35,568. So basically, those people on your payroll or employees that work for you and are paid under this new threshold will be eligible for overtime pay on January 1, 2020.
According to the Department of Labor, this new rule is going to prompt employers to reclassify a million people from exempt to non exempt or hourly to salary. So this new rule is going to have big implications for business and especially small business.
So some background on salary. A lot of small business owners think that if someone is on salary, that worker has no limit on the hours they can work per week. But that the worker has to work at least 40 hours per week.
On the Federal level, there is no maximum on the number of hours you can work your employees if they are on salary. But there is also no minimum amount of hours either. So if you have an employee who can accomplish all their requirements in 10 hours. They technically don't have to be at work for the remaining 30 hours. Is this going to happen, probably not. But as a small business owner it is important to know that if you have a salaried employee, there is no minimum amount of hours. Because by making someone a salaried employee, you are trusting them to do the job regardless of the number of hours worked.
Now, this is at the Federal level, some states are different. For example, the state of Washington has a law that says you can't work anyone over 60 hours per week. Even if they are on salary, you cannot work them over 60 hours per week.
Another item about overtime.
A lot of small business owners believe falsely that an employee can only work overtime if you give them permission. A lot of companies have rules that say you can only work overtime if you receive permission or meet certain requirements. But according to the Fair Labor Standards Act you have to pay for all hours worked and pay time and a half for all hours worked past 40 hours.
So if your employee works overtime and even if they don't have your permission to to work overtime. You have to pay them time and a half.
So not a lot of time for a small business to react to this. The new law goes into effect on January 1, 2020. I believe this new salary requirement is going to have a significant impact on small business. Especially, when it comes to budgeting for payroll, hiring and promoting.
Any questions about this or anything else HR related reach out to me at jasoncavness@cavnessHR.com