Pub. 10 2019 Issue 4

www.wvbankers.org 10 West Virginia Banker The New Overtime Rules Are Coming – Is Your Bank Ready? By J. Tyler Mayhew, Bowles Rice LLP O n January 1, 2020, new regu- lations from the United States Department of Labor (“DOL”) will go into effect, increasing the min- imum compensation requirements for the most common exemptions from minimum wage and overtime pay pro- tections under the Fair Labor Standards Act (the “FLSA”). 1 The DOL’s final rule, announced September 24, 2019, raises the minimum salary level for the so-called “white collar” or “EAP” exemptions (employees employed as bona fide executive, administrative and professional employees and cer- tain computer employees) from $455 per week to $684 per week ($35,568 per year). The new rule also raises the minimum total annual compen- sation for “highly compensated em- ployees” from $100,000 per year to $107,432 per year. The DOL estimates that 1.3 million American workers will become eligible for overtime pay unless their employers take action to raise em- ployee pay in line with the new rule. The FLSA requires an employer to pay at least a minimum wage (in West Vir- ginia, $8.75 per hour), and pay overtime (“time-and-a-half”) for hours worked in excess of 40 hours per workweek unless an employee is exempt from the act’s protections. Through the end of this year, employers are not required to pay overtime to employees who perform certain exempt job duties and who are paid a salary of at least $455 per week. This salary threshold was last updated 15 years ago. The DOL’s new rule makes the following changes, 2 effective Janu- ary 1, 2020: 1. the required minimum salary for the “white collar” or “EAP” exemptions will increase from $455 per week ($23,660 per year) to $684 per week ($35,568 per year); 2. the total annual compensation requirement for “highly compensat- ed employees” will increase from $100,000 per year to $107,432 per year; 3. employers will be allowed to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the required minimum salary, so long as the payments are made on an annual or more frequent basis. The employer may select any 52- week period as the year, such as a calendar year, fiscal year, etc.; and 4. if the sum of an employee’s salary, plus nondiscretionary bonus and incentive payments, does not meet the annual salary requirement by the end of the 52-week period, the employer is also permitted to make a final “catch-up” payment on the next pay period to preserve that employee’s exemption. If you have not already done so, it is not too late to identify potentially-affected employees within your organization and decide whether it will make business sense to start paying those employees overtime or increase their salaries to the new minimum salary level. The upcoming changes to the salary requirements also present an opportu- nity to audit your pay practices to ensure that your financial institution is properly classifying employees as exempt under the FLSA and state law. Employee