Department of Labor Issues New Overtime Rules for 2020

The Department of Labor (DOL) issued its highly anticipated final rule, modifying the exemptions to the Fair Labor Standards Act (FLSA) overtime rules for certain white-collar employees (executive, administrative, professional, and computing positions) and highly compensated employees. 

Many readers may remember the Obama Administration first attempted to issue new rules, only to have them blocked by a federal court injunction on the eve of their effective date. Rather than continuing the legal fight in support of the Obama Administration’s rules, the DOL, under the Trump Administration, decided to walk away from those rules and instead began the rulemaking process anew – which ultimately led to this latest set of final rules.

The final rule, which goes into effect on January 1, 2020, increases the minimum salary employees must be paid to qualify for the white-collar or highly compensated exemptions. However, as described further below, these increases are significantly smaller than those that were enacted, but never went into effect, under the Obama Administration. The new rules also do not make any changes to the duties tests associated with the exemptions.

The key regulatory changes embodied in the final rules are as follows:

• On January 1, 2020, the salary threshold for the white-collar exemption will increase approximately 50% from the current $455 per week (or $23,660 annually) to $684 per week (or $35,568 annually).

• On January 1, 2020, the salary threshold for the highly compensated will increase from $100,000 annually to $107,432 annually.

• The salary thresholds for the white-collar and highly compensated exemptions will not be subject to automatic increases.

• Under the new rule, employers will be permitted to count non-discretionary bonuses and incentive compensation (including commission) towards up to 10% of the white collar salary threshold as long as the payments are made at least annually.

• The new rule will make no changes to the duties tests for the white-collar or highly compensated exemptions.

From a financial standpoint, this will largely require businesses to make an employee-by-employee assessment of the amount of overtime a particular employee works versus the amount the employee’s salary would need to be increased to meet the new threshold. Of course, businesses can place strict limitations on the amount of overtime it will allow a newly non-exempt employee to work in order to avoid increased payroll costs. However, this will need to be balanced with productivity concerns, particularly where the employee has traditionally worked significantly more than forty hours per week. For employers who do end up reclassifying employees as non-exempt, they will also have to start tracking hours in order to calculate when and how much overtime is due.

While the new rules do not make any changes to the duties tests, businesses that are evaluating employee exemptions will also want to make sure all employees they are classifying as exempt meet both the pre-existing duties tests and the new salary thresholds.

These are two new laws in Illinois that take effect soon.

Public Act 101-0177 amends the Illinois Equal Pay Act. This law takes effect at the end of September 2019. It will then be a violation of the Equal Pay Act for an employer to require an employee sign a contract that prohibits that employee from disclosing or discussing information about the employee=s wages, salary, benefits, or other compensation. An employer may, however, prohibit a human resources employee with access to that information from disclosing it without the employee’s consent.

Further, it is unlawful for an employer to screen job applicants based on prior wage history. It is also unlawful to request or require a wage history form an applicant as a condition of being considered for employment.

Last, an employer cannot seek to determine the prior wage history of an applicant from prior employers unless that information is a matter of public record.

It is permissible to advise applicants about the wages, benefits, compensation, and salary offered in connection with the position and it is permitted to engage in discussions with the applicant about the applicant=s expectations with respect to compensation and benefits.

There are civil penalties for violations of the Equal Pay Act.

Public Act 101-0168 amends the Code of Civil Procedure and reduces the rate at which judgments for consumer debts of $25,000.00 or less accrue interest from 9% to 5%. This reduction applies to judgments for consumer debt obtained after January 1, 2020. The Illinois Legislature felt many consumers were incapable of getting out of debt with that high an interest rate. All other judgments in Illinois will continue to accrue interest at 9% per annum.