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Managing New Overtime Rules

Author: Ronald E. Lyons Date: 05/02/2020

Categories: Corporate and Business Law, Employment Law & Litigation

Business woman sitting at her work desk at night drinking coffee and staring at a computer screen symbolizing that she is working overtime.

Groups of workers just became eligible for overtime pay following the adoption of new regulations by the Department of Labor.  It is estimated that 1.4 million additional workers will now be in line to receive overtime compensation.

Effective as of January 1, 2020, the base salary level at which administrative, executive and professional employees can be classified as “exempt” from overtime has increased from $455 per week to $684 per week.  This equates to $35,568 per year for full-time employees. In addition, the threshold level of annual compensation for “highly compensated employees” has increased from $100,000 to $107,432. As a result of this change, employers need to revisit their employee compensation to determine whether any of their employees, who were previously ineligible for overtime, are now entitled to receive it.

Recognizing that unplanned overtime can wreak havoc on a company’s bottom line, it is vital that employers take affirmative steps to review and communicate overtime policies and procedures.  Some steps to consider implementing at this time include the following:

  • Be sure your company has a clearly stated overtime policy.  The policy should be in writing and communicated to all affected employees.  By the same token, managers and supervisors need to be aware of the new rules.
  • Establish a requirement that overtime needs to be approved by management, and in writing, prior to allowing an employee to work overtime.
  • Implement appropriate tracking procedures to monitor overtime.  Consideration should be given to using software that is reliable and which will also provide the employer with notifications when non-exempt employees are about to hit the threshold.  This can enable employers to be proactive in managing the workloads and schedules of its employees.
  • Through the company’s employee manual, include the ability to discipline employees who incur unauthorized overtime.   While the employer is still required to pay for unauthorized overtime, having the manual clearly establish that such action may trigger disciplinary action becomes an effective way to deal with repeat transgressors.

These new rules are now in effect.   As necessary, consult with your attorney to discuss how to best implement your own policies, procedures and employee manual revisions.   For any questions regarding this, please contact Ronald Lyons at 240-778-2306 or rlyons@mcmillanmetro.com