By Richard I. Lehr Esq.
Under a U.S. Labor Department rule, managers or professionals who earn less than $35,568 a year – $684 a week – will be eligible for overtime pay starting Jan. 1.
The rule increases the salary-level threshold for white-collar exemptions by $229 weekly (from $455 to $684), under the Fair Labor Standards Act. The Labor Department estimates 1.3 million additional workers nationwide will be eligible for overtime under this updated threshold, which was last adjusted in 2004.
Meeting the salary threshold doesn’t automatically make an employee exempt from overtime pay, the employee’s specific job duties also come into play.
While the annual mean wage of first-line supervisors in retail sales in Alabama is $40,790 to $43,760, Alabama’s retailers and other employers should evaluate their pay levels and exemptions based on this new rule.
NEXT STEPS FOR EMPLOYERS
- There is no requirement to keep someone exempt if the employer does not want to increase the salary level. Thus, evaluate what the increased cost would be with the exemption and if the cost would increase under a non-exempt pay system, such as hourly or fixed salary for fluctuating workweek.
- If the employee will be paid hourly, determine that amount by calculating how many hours the employee would work, including overtime, and set the hourly rate accordingly. You may not pay the hourly employee the same amount each week if overtime hours vary — the pay must vary to reflect the weekly calculation.
- If the decision is to no longer treat the employee as exempt because of the increased salary level, the employee’s title or job duties do not need to change — the change will be compensating the employee for overtime.
- Be candid with exempt employees about the decision to convert to non-exempt or why the salary increase has occurred, particularly if the Jan. 1, 2020, increase is out of cycle from when the employer normally considers raises.
- Considering the holiday season, you may decide to keep the exempt pay as is and then either increase it or convert to non-exempt as of Jan. 1 — that’s your prerogative.
- Inherent in your assessment to increase pay or treat the employee as non-exempt is the employee’s morale. What makes sense for the business and is viewed by the employee as reasonable? As stated earlier, you do not need to change an employee’s job title or duties to comply — only the pay changes if the salary as of Jan. 1 is below the new minimum.
Richard Lehr is a founding partner with the Birmingham labor and employment law firm, Lehr Middlebrooks Vreeland & Thompson, P.C.