September 9, 2020

Overtime Law Changes on the Horizon

Overtime Law Changes on the Horizon

Preparation and Patience: Department of Labor Overtime Law on the Horizon but Not Final

The U.S. Department of Labor (DOL) has sent a proposed rule change to the White House for review that will impact the exempt/nonexempt status of employees. All indications are that the rule will be made final and, when it is, the DOL may not give employers much time to fall into compliance. Cities should take this time to review employee classifications and determine which employees, if any, would be impacted by the change if it is finalized.

Exempt versus Nonexempt
The Fair Labor Standards Act (FLSA) defines the federal minimum wage, employee time record keeping requirements, and jobs required to receive overtime compensation after forty (40) hours have been worked in a workweek. If an employee is classified as “nonexempt” under the FLSA, the employee is covered by the overtime provisions of the FLSA. Nonexempt employees must record each hour worked and if the employee works more than forty (40) hours in one workweek, the employee is paid time and one-half. If an employee is classified as “exempt” under the FLSA, the employee is not covered by the overtime provisions of the FLSA and are paid an agreed amount for the whole job, regardless of the amount of time or effort required to complete the work.

To be classified as exempt, an employee must meet all of the standards in the following "tests":
Be paid over a minimum salary;
Be paid on a salary basis as opposed to an hourly basis; and
Perform certain duties as outlined in one of the duties tests.

Proposed Rule Change
The proposed rule change would raise the minimum salary standard listed in number one, above. The current salary threshold is $23,660 or $455 per week. This means an employee must make at least $23,660 in addition to meeting the other requirements to be classified as exempt. The rule would raise the threshold to $35,308 or $679 per week. If the rule increasing the threshold becomes final, any currently classified exempt employees making a salary between $23,660 and $35,308 would need to be reclassified as nonexempt.

City Next Steps
This is a great opportunity for cities to review all employee classifications and ensure compliance with the FLSA. Here are some suggested next steps for cities:

  1. Review all positions and ensure compliance with current standards for exempt versus nonexempt. 
  2. Identify any exempt positions that fall between the current threshold ($23,660) and the new threshold ($35,508) to determine which positions will need to be reclassified IF the new rule is finalized.
  3. For any positions that fall between the old and new thresholds, determine whether the duties typically require the employee to work more than forty (40) hours. Cities may want to consider any cost for newly required overtime pay versus the cost of a salary increase above the new threshold, IF the rule is finalized.
  4. DO NOT MAKE CHANGE, yet. Cities should start preparing but remain patient and not implement any changes until the rule is final.
  5. Call KLC if you have any questions and for additional resources on determining exempt versus nonexempt classification.

For more information, please contact Andrea Shindlebower Main.