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If you have employees then, YES, the new OVERTIME rule applies to you! Maybe you are feeling like this is a rerun and you are saying to yourself, “I thought we had a new rule a couple of years ago?”  If so, you are absolutely correct!  In fact, many of you businesses were so on top of this that you had gone through the painstaking efforts of changing how you categorize and pay your employees only to find out that the 2016 rule was invalidated.

Quick Summary of Obama’s 2016 overtime rule:

  • You could no longer pay a “salary” to ANY employee who earned less than $47,476 a year;
  • Former salaried employees would have to clock in and out;
  • Employers still keep record of employees work time; and
  • Any hours worked over 40 in a week MUST be paid overtime, time and a half for hourly employees.

Thus, many salaried employees would no longer be considered “exempt,” they would be paid by the hour. This law was going to blindside many small businesses and the financial impact would have been detrimental to labor costs.  In fact, businesses were scrambling to figure out how to cover the financial hit that was coming to cover the extra labor costs.  First, a business had to figure out which employees were being paid a “salary” less than the high 2016 threshold of $47,476 a year.  The result was probably a high number since most businesses paid salaried employees more than the old threshold of $23,600 per year but not anywhere near the new $47, 476 amount.  From this, many employees would have seen a pay raise or they would be working less hours so the employer wouldn’t be required to pay them overtime.  Either way, businesses were bracing for a significant increase in labor costs!

What happened then to the 2016 Obama overtime rule?

Several states fought back with legal action.  As the cases found their way through the court system, ultimately the states won a summary judgment motion ruling that the Department of Labor overstepped it’s authority with issuing the new rules.   As the 2016 overtime rule was invalidated, the Department of Labor pursued feedback to come up with a more realistic salary threshold amount for an overtime rule.

New Overtime Rule takes effect on January 1, 2020

The new overtime rule is a product of collected feedback from business owners who had concerns of the high-level standard amount for “salaried” workers.  The new salary threshold is $35,568.  Even though a change like this will still shock many businesses’ bottom line, this new amount is not as extreme as the 2016 Obama overtime rule.  It seems like this change was brought about the right way, the Department of Labor actually seeking feedback on what to do.  This was not done haphazardly.

What Should You Do Today?

You have until December 31st to figure out which, if any, of your employees need to have a change in how they are paid and the amount they are paid.  By January 1, 2020 you must be ready and in compliance with the new overtime rule.  Don’t put this off, as it will not be a quick task.  Find out what steps you should be taking right now.

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Editor’s Note: This post was originally published in November 2016 and has been completely revamped and updated for accuracy and comprehensiveness.