Beginning January 1, 2020, new federal overtime regulations will go into effect. The new rules will impact exempt salaried employees who make at least $455 per week or $23,660 per year, “high salaried employees,” and workers who make less than $35,500 per year.
What is the difference between exempt and non-exempt employees? An exempt employee is not entitled to receive overtime pay and must be paid a salary. A non-exempt employee is entitled to receive overtime at 1.5 times their regular rate, can be paid a salary or hourly wage, can earn any amount of money per week as identified by their employer and can work in any field.
The other distinguishable traits that separate exempt employees include the salary threshold and the fact that their job must fit into one of five main categories:
- Outside Sales
Beginning on January 1, salaried workers making at least $684 per week or $35,568 per year will not be entitled to receive overtime pay. To qualify for overtime exemption, employees will also have to pass employment tests to ensure their job duties line up with one of the five main categories above.
Highly compensated employees
The current overtime exemption for “highly compensated employees” is set at $100,000. The new guidelines have raised that threshold to $107,432. To make up the difference, employers, beginning in 2020, will be allowed to pay these employees incentive payments, commissions and non-discretionary bonuses (a bonus the employer must pay if the employee meets specific contractually agreed-upon criteria). Employers often pay these Non-discretionary bonuses monthly or quarterly and are often a set amount. These payments must be paid at minimum once per year and are required to equal up to 10% of the standard threshold for the “highly compensated employee” to keep up to date with evolving pay practices.
Other employees who may qualify for overtime-exempt status
Specified workers in the retail or service industry who’s primary pay is commission-based may be exempt from overtime opportunity. Examples include:
- Car, truck, trailer, farm equipment, boar or aircraft sales
- Auto, truck or farm implement part workers, salespeople or mechanics who work for non-assembling companies that focus on selling these products to buyers
- Railroad and air carrier workers
- Taxi drivers
- Specified employees of vehicle sales companies
- Local delivery employees who have approved trip-rates
- Announcers, news editors and chief engineers of particular rural tv or radio stations
- In-home service workers
- Movie theater employees
- General farmworkers
In addition to the new federal regulations, state exemption laws could also change. Additionally, the new rules will mandate employers to pay overtime to any employee who makes $35,000 or less per year. That equates to 1.3 million additional United States workers who will begin receiving overtime pay starting on January 1, 2020.