The U.S. Department of Labor ("DOL") released its much-anticipated update to the existing federal overtime law. The DOL estimates this change will impact 1.3 million employees. 
Beginning on January 1, 2020 , the minimum salary required to qualify for the “white-collar” exemption to overtime will increase to $648 per week ($35,568 per year) from $455 per week ($23,660 per year). After that date, any executive, administrative, and professional employee earning less than the new threshold amount will become eligible for overtime pay (1½ times their regular rate) for any time worked over 40 hours in a work week.

Additionally, the new rule changes the annual compensation requirement for “highly compensated employees” to $107,432 from $100,000. Employees who earn less than this amount will need to qualify under another exemption to be considered exempt from overtime pay.

The DOL did not change any of the exemption tests as they relate to job duties. Employers who previously completed a classification audit to determine whether employees fit the executive, administrative, or professional exemptions will need only to confirm that salaries meet the new requirements.

NOTE: NEW JERSEY EMPLOYERS are subject to federal threshold levels only.
New York employers should keep in mind that state and city overtime thresholds are already higher than the new federal level for administrative and executive employees, and some numbers are set to increase beginning on December 31, 2019 :

  • Currently, employers with 11 or more employees in New York City are required to pay a minimum of $58,500 annually for their administrative and executive employees to qualify as exempt from overtime pay.

  • Employers with 10 or fewer employees in New York City are required to pay a minimum of $52,650 through December, which will increase to $58,500 on December 31, 2019.

  • Employers in the suburban counties of Nassau, Suffolk, and Westchester, are required to pay $46,800 annually, which will increase to $50,700 beginning December 31, 2019.

  • Employers in the remainder of New York state are required to pay $43,264 per year, which will increase to $46,020 beginning on December 31, 2019. 
  • Pull data for exempt workers earning close to the new cutoff (consider non-discretionary bonuses, incentive payments and commissions separately, as they may be used to satisfy a percentage of the standard salary level).

  • Seek guidance from counsel to weigh the cost of raising salaries above the threshold, versus reclassifying employees as nonexempt and paying overtime.

  • Review and update timekeeping policies and mechanisms, if necessary, to accurately track and pay overtime.

  • Have counsel review job descriptions and classifications based on job duties to ensure full compliance. It is beneficial to make all necessary changes at one time and strategize to effectively communicate them to your workforce.

  • Engage counsel in the self-audit process to leverage the added protection of attorney-client privilege in the event of a DOL inquiry or audit.
QUESTIONS? If you have questions regarding the new Overtime Rule, or any other employment law related questions, please contact Heather Adelman, Esq. | 973.467.1325
This publication/newsletter is for informational purposes only and does not contain or convey legal advice regarding any specific situation. This material may also be considered attorney advertising under court rules of certain jurisdictions.