34 NOVEMBER / DECEMBER 2019 HUMAN RESOURCES Debra A. Mastrian Partner SmithAmundsen LLC dmastrian@salawus.com SmithAmundsen LLC is a Diamond Associate Member of the Indiana Bankers Association. On Sept. 24 the U.S. Department of Labor announced its long-awaited final rule increasing the minimum salary necessary to qualify for the white-collar overtime exemptions (executive, administrative and professional) under the Fair Labor Standards Act. Under the new final rule, the salary threshold increases from $23,660 annually ($455 per week) to $35,568 annually ($684 per week).1 Employees earning less than the new salary threshold will no longer qualify for the white-collar exemptions and would have to be paid overtime for all hours worked in excess of 40 in a workweek. The new final rule takes effect Jan. 1, 2020. The DOL announced a similar final rule back in May 2016, with an even larger increase in the salary threshold. That rule, however, was blocked by a court injunction shortly before it took effect. The new final rule may face similar challenges, but a reprieve is far from certain. Therefore, employers should take steps now to ensure they are ready to meet the Jan. 1 effective date. The new final rule only affects the salary part of the overtime exemption analysis. In order for an employee to be exempt from overtime under the FLSA, the employee must satisfy both: 1. The salary test (meet the salary threshold); 2. The jobs duties test (meet certain job responsibilities as defined in the regulations). If the employee does not satisfy both parts, the employee must be paid overtime (1½ times their hourly rate for hours worked in excess of 40 in a workweek). Note: Historically, it has been the misapplication of The information in this article is provided for general information purposes only and does not constitute legal advice or an opinion of any kind. You should consult with legal counsel for advice on your institution’s specific legal issues. Major Change to FLSA Overtime Rule Set to take effect Jan. 1, 2020 the job duties test, rather than the salary test, that has resulted in FLSA violations. What should employers do now in order to comply with the new final rule? Employers should look at whether they have any employees currently classified as exempt white collar workers earning less than $684 per week. Assuming the employees are properly classified (meet the job duties test for the particular exemption)2, employers can either increase the employee’s salary to meet the new salary threshold (in which case the employee remains salaried and exempt from overtime) or reclassify the employee as nonexempt. A nonexempt employee can be paid on an hourly or a salary basis, but must be paid overtime for all hours worked over 40 in a workweek. Finally, although Indiana generally follows the federal requirements, employers with operations outside the state must be aware that individual states can (and many do) afford employees more generous protections, and employers must follow the law that is most beneficial to the employee. HB 1 The new rule also increases the minimum salary to qualify for the “highly compensated employee” exemption from $100,000 to $107,432 annually. 2 The white collar exemptions are fact-specific. It is the actual duties the employees perform – not their job titles – that control whether an exemption applies. Job descriptions should be reviewed and updated, if necessary, to ensure they accurately reflect the actual job duties of positions.
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