Are You Required to Pay Overtime to Managers? The Rules are About to Change.
On September 24, 2019, the U.S. Department of Labor changed the rules that apply to whether you must pay managers overtime if they work more than 40 hours in a work week. The change goes into effect on January 1, 2020.
Under the old rule, to be an “exempt” employee (that is, exempt from overtime requirements), a manager had to make at least $455/week ($23,660/year). Under the new rule, a manager must make at least $684/week ($35,568/year). The upshot: if you have a manager making less than $684/week, you will either have to start paying overtime, or raise the manager’s compensation.
Important: Under both the old and new rules, to qualify as exempt, a manager must also satisfy a “duties” test – that is, the manager’s duties must include a high level of responsibility and discretion, as defined in DOL regulations.
Some things to consider:
- If you raise a manager’s salary from, for example, $675/week to $685/week to escape the overtime requirement, be prepared for a potential backlash – the manager will know that he or she just lost a lot of money in potential overtime in exchange for a $10/week raise. Packaging will be everything.
- The duties test is not as easy to meet as many companies believe. It requires much more than a title and some managerial responsibilities. Be careful; counsel should review whether a manager’s actual job duties satisfy the requirements.
- The publicity about this rule change will ramp up during the next several months. Employees who have been misclassified as exempt may learn that they should have been paid overtime; a simple phone call to the DOL could trigger an overtime audit. You can expect a substantial increase in surprise DOL overtime audits. Violations can lead to liability for years of back overtime, plus interest and substantial penalties.
Here is the key take-away: Before the new rule goes into effect, employers should self-audit their compliance with the overtime rules and, depending on the audit results, they should quickly implement appropriate fixes. The DOL treats employers who voluntarily address overtime issues much more favorably than those who ignore their workplace illegalities until the government ferrets them out.
Wisler Pearlstine’s employment compliance attorneys have guided employers through these and related traps and pitfalls for decades. Let us know how we can help you.
This article is intended to be used only for informational purposes and does not constitute legal advice.
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