Your employees are classified as either EXEMPT (from overtime pay), or NON-EXEMPT (and thus entitled to overtime pay). Two things are required for a position to be classified as “exempt.” The first is that the position must fit into one of the categories of types of work that the Fair Labor Standards Act treats as exempt. Secondly, the position is paid a salary (a fixed amount of money paid on a regular basis) of at least X amount. For many years, that amount has been $23,660. The Department of Labor has just announced that the new threshold number is $35,568. This is to take effect on January 1 of 2020.
As of January 1, 2020, if you are currently classifying some of your positions as exempt and paying those positions less than $35,568 annually, you will have a problem. You need to determine whether you want to increase those salaries to preserve the exemption from overtime, or lose the exemption for those positions and pay them overtime. Consider taking these steps:
- Do an analysis. Determine how many employees you have that are in exempt positions but paid less than $35,568 annually.
- Consider your options. You can either raise the position pay to $35,568, or lose the exemption. Which is less harmful? Keep in mind if you have 10 administrative assistants, and 6 make more than $35,568 already, and 4 make less, you cannot simply elect to lose the exemption for the 4 who don’t make enough money to meet the salary threshold. The exemptions are assigned to POSITIONS, not employees.
- Be considerate of morale issues. For whatever reason, people view “exempt” as having a higher status. Even though they could potentially make more money as a non-exempt employee being paid overtime, they would prefer to hold the title of exempt.
- Some of you have never done a careful analysis of exempt/non-exempt for your positions. This is a good time to get your house in order.
If you are unsure of how to do this analysis, feel free to contact your employment counsel, or the author of this article for assistance.
James W. Southworth, Esquire
Principal, Dickie, McCamey & Chilcote, P.C.