Appointments in Norwich and Groton

New Overtime Rules May Impact Classification of Overtime-Exempt Employees

The U.S. Department of Labor announced today the issuance of a new rule that directly impacts which employees may properly be classified as “salaried overtime exempt.”  Specifically, the rule increases the compensation level required in order for employees to meet the salary portion of the Fair Labor Standards Act (FLSA) overtime exemption test.  Beginning January 1, 2020, the FLSA minimum salary requirement for exempt employees will increase from $455/week (or $23,660/year) to $684/week (or $35,568/year).  To the extent this amount exceeds Connecticut’s state law salary threshold of $400/week (or $20,800/year), in order remain compliant with the FLSA, for any employee whose salary is below the new $684/week threshold, employers will be required either to:  (1) reclassify those employees currently classified as overtime-exempt; or (2) increase the salary of such employees to meet or exceed the new salary threshold.  (Note:  The rule change does not alter the “duties” portion of the salaried exempt test relating to executive, administrative, professional and other exempt employee classifications.) 

Given the looming effective date of this rule change (January 1, 2020), employers should begin now assessing how best to comply with the rule change.  Any decision to increase employees’ salaries, so as to maintain their overtime-exempt status, should take into consideration, among other things, (a) the potential “domino-effect” such salary increases may have on the salary demands of employees presently compensated at or above the new threshold, (b) when such salary increases should become effective, (c) how salary increases might impact routine company bonus or pay increase plans, and (d) the bottom-line impacts of a significantly increased payroll.  If reclassifying employees to non-exempt status, concerns may arise such as (a) effectively communicating to such employees the importance of tracking (and monitoring) hours, (b) the possibility of decreased employee morale for those who feel they have been “demoted” by the change to non-exempt status, and (c) difficulties reining in or controlling overtime costs. Should you have questions regarding how this new rule may impact your business, feel free to contact Brown Jacobson’s Employment Practices Group for further information.