On January 1, 2020, the new federal overtime rule takes effect.  Other than in states with already-higher minimum salaries for exemption (which include California and, for certain types of employees, New York), employers will be required to pay most executive, administrative, and professional employees at least $684 per week ($35,568 per year).  Are you ready for this change?

  • Have you prepared a list of potentially affected employees?
  • Have you compared the cost of increasing their salaries to the new minimum with the cost of keeping their salaries where they are and paying for overtime?
  • If you raise their salaries to the new minimum, have you considered whether you still have a “duties test” risk?
  • In states where it matters, will you take advantage of your right under the new rule to use bonuses, commissions, or other incentive compensation as a credit toward the new salary threshold?
  • If you reclassify employees to overtime-eligible, are your supervisors ready to manage the attendant overtime costs?  Do they understand what kinds of hours are considered “hours worked” (e.g., certain travel time, time spent working from home or remotely, etc.)?
  • Have you considered the alternatives to paying reclassified employees on an hourly basis?
  • Do you understand what kinds of compensation will have to be included in the “regular rate of pay” for overtime purposes?

For employers in New York and California, the preparation will be more limited.  New York already has minimum salaries for exempt executive and administrative employees well in excess of the new federal minimum (e.g., $1,125 per week for most employers in New York City).  So the federal rules—including the ability to credit bonuses, commissions, and incentive pay to the minimum salary for exemption—won’t matter for those employees.  New York has no minimum salary for exempt professional employees, however, so New York employers should determine whether any of their exempt professionals are earning less than the new federal minimum.

In California, exempt executive, administrative, and professional employees must earn a monthly salary of no less than twice the state minimum wage for full-time employment (currently, for all but small employers, $4,160 per month, or $49,920 annually)—well in excess of the new federal minimum.

From a planning standpoint, January 1 is around the corner.  It’s time to figure out what the new federal overtime means to your business.

Subscribe to Proskauer’s Wage and Hour blog for continued analysis of developments affecting your business.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Allan Bloom Allan Bloom

Allan S. Bloom is a nationally recognized trial lawyer and advisor who represents management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended a number of the world’s leading companies against claims for unpaid wages…

Allan S. Bloom is a nationally recognized trial lawyer and advisor who represents management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended a number of the world’s leading companies against claims for unpaid wages, employment discrimination, breach of contract and wrongful discharge, both at the trial and appellate court levels as well as in arbitration. He has secured complete defense verdicts for clients in front of juries, as well as injunctions to protect clients’ confidential information and assets.

As the leader of Proskauer’s Wage and Hour Practice Group, Allan has been a strategic partner to a number of Fortune 500 companies to help them avoid, minimize and manage exposure to wage and hour-related risk. Allan’s views on wage and hour issues have been featured in The New York TimesReutersBloomberg and Fortune, among other leading publications. His class-action defense work for clients has saved hundreds of millions of dollars in potential damages.

Allan is regularly called on to advise boards of directors and senior leadership on highly sensitive matters such as executive transitions, internal investigations and strategic workforce planning. He also has particular expertise in the financial services industry, where he has litigated and arbitrated cases, including at FINRA and its predecessors, for more than 20 years.
A prolific author and speaker, Allan was the Editor of the New York State Bar Association’s Labor and Employment Law Journal from 2012 to 2017. He has served as an author, editor and contributor to a number of leading treatises in the field of employment law, including ADR in Employment Law (ABA/Bloomberg BNA, Senior Editor), Employment Discrimination Law (ABA/Bloomberg BNA, Final Proof Editor), Cutting Edge Advances in Resolving Workplace Disputes (Cornell University/CPR, Editor), The Employment Law Review (Law Business Research, U.S. Chapter Author), and The Complete Compliance and Ethics Manual (SCCE, Chapter Author).

Allan is a member of the NYSBA’s House of Delegates, sits on the Executive Committee of the NYSBA’s Labor and Employment Law Section, and is a Fellow of the College of Labor and Employment Lawyers. He has been recognized as a leading practitioner by Chambers since 2011.