Federal Overtime Threshold Increases on January 1, 2020

Effective January 1, 2020, the federal white-collar exemption, which was $455.00 per week ($23,660.00 annually) in 2019, will be raised to $684.00 per week ($35,568.00 annually).  Any employee under the $35,568.00 limit will be deemed a non-exempt, hourly wage earner eligible for overtime.  In addition, the threshold for the exemption for highly compensated employees – which provides an exemption for well paid employees who do not meet all of the executive, administrative or professional exemptions – will be raised from $100,000.00 to $107,432.00.

The new Rule allows employers to count non-discretionary bonuses and incentive payments paid at least annually to satisfy up to 10 percent of the new salary threshold.  However, non-discretionary bonuses cannot be applied.

Of course, New York State employers must meet much higher thresholds.  Commencing December 31, 2019, New York City employees have to pay exempt employees at least $1,125.00 per week, while Nassau, Suffolk and Westchester County employers have to pay exempt employees at least $975.00 per week.  Employees in the rest of New York State must pay exempt employees a minimum of $885.00 per week.

It is imperative that employers review their payroll practices and the duties and responsibilities of those employees classified as exempt from overtime, and either raise salaries to meet the new threshold or convert the affected exempt employees from a salary to an hourly pay model.