New Overtime Rule Effective January 1, 2020

Here’s what you need to know about the change:

The current minimum wage for North Carolina hourly workers is $7.25 per hour, the same as the federal minimum wage. For exempt employees, employees who do not get paid for overtime, but are paid a salary, the minimum amount you must pay is increasing on January 1, 2020. This amount is often referred to as the salary threshold.

What is the change?

The current minimum salary requirement for an exempt employee is $455 per week. On January 1, that amount increases to $684 per week or $35,568 annually. This is a much-anticipated change and will likely affect many employers and workers.

What should I do if I have employees who are exempt from overtime and don’t make $684 per week?

Employers have a couple of options come January 2020:

Option one is to change the way those workers are paid. Employees who are currently being paid a salary (exempt from overtime) can be changed to an hourly wage and pay overtime, equal to one and one-half times their hourly rate, for hours worked over 40 in one week.

Option two is to continue to pay the employee as exempt with no overtime and increase the wage of those employees to at least $684 per week or $35,568 annually.

There are a few considerations in making this decision.

  1. How many hours per week is the employee actually working, and if you paid time one- and one-half times their hourly rate for every hour over 40, what is the cost of making this change?
    1. Keep in mind that their hours worked may increase or may be more than you anticipated if the employee is not managed appropriately.
  2. If the employee is taking work home, answering emails or taking calls from the company during off-work hours, it could have an impact on the business and the employee’s pay as well.
    1. Will the employee be willing to take those calls or answer emails if they are no longer a “salaried employee?”
    1. What is the loss for the company if they don’t?
    1. If the calls are more than a few minutes, the employee must be paid for that time. What will be the impact of that payment?
  3. Often, there is a status associated with not having to clock in and out. That status may translate into the employee taking more ownership for their job. There is value in that ownership, even though it may be difficult to quantify. 
  4. Changing a salaried employee to hourly may increase the risk of losing a highly valued employee, and in this tight labor market that may not be a risk you want to take.

Here is what has not changed that employers don’t always realize until it is too late and are issued fines and penalties for not complying:

  1. Employees must meet the qualifications set forth in the Fair Labor Standards Act to be paid salaried, exempt from overtime. Employers cannot pay employees the minimum amount (on January 1, $684) and not pay them overtime. The job must meet the qualifications AND the salary must be at least the minimum. More information here: https://www.dol.gov/whd/overtime/fs17a_overview.pdf
  2. Employers who pay employees on a per piece or per job must record the hours worked for the workers and be able to prove to the Department of Labor that the employee is being paid at least minimum wage plus overtime for hours over 40. https://www.dol.gov/whd/regs/compliance/whdfs23.pdf
  3.  Employees cannot volunteer for their employer. Worked hours must be paid.
  4. Employees who are available to answer the phone or wait on a customer while they are eating their lunch must be paid for that time even if the phone never rings or the customer never shows up.
  5. Employees who are traveling from job to job during the course of their workday must be paid for the travel time. https://www.dol.gov/whd/regs/compliance/whdfs22.pdf

For more information on these and other HR questions, please contact Cristy Carroll, Wise HR Partnerships at 704-650-8684 or email me at cristy@wisehrpartnerships.com.

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