December 2019
More than just the seasons are changing. Employers across the nation are preparing for HR changes that will impact their organizations into year 2020 and beyond. HR 2020. Are you ready?
On September 24th, after a lengthy process, the U.S. Department of Labor (DOL) issued a final rule that raised the salary threshold for exemption under the Fair Labor Standards Act (FLSA).[i] The rule is scheduled to take effect on January 1, 2020.
The new salary threshold will increase to at least $684 a week ($35,568 per year). The current threshold requires at least $455 a week ($23,660 per year).[ii] DOL estimates the change in the salary threshold will extend overtime protections to more than 1 million workers who are not eligible under current law. Nondiscretionary bonuses and incentive payments (including commissions) paid on an annual or more frequent basis may be used to satisfy up to ten percent of the salary.
In addition to increasing the salary requirement for exempt workers, the new rule raises the threshold for highly compensated employees from $100,000 a year to $107,432 ($684 must be paid weekly on a salary or fee basis).
The FLSA has a long history, with the first salary threshold set at $1,560 per year in 1938. The overtime regulations were last updated in 2004 and were the focus of a bitter debate after a 2016 ruling would have almost doubled the salary threshold (from $23,660 to $47,476), resulting in a court battle and a federal court blocking the rule just days before implementation. The DOL reports it plans to update the threshold on a more regular basis in the future.
Northland employers should be preparing for the upcoming change, identifying exempt employees that fall below the new $35,568 threshold and planning to either bump up salaries or convert employees to non-exempt status. Communication will be a key component of any changes and savvy employers will make sure adjustments are transparent and understood by employees.
Keep in mind that salary is just one component in the exempt v. non-exempt analysis. Although the new rule doesn’t make any changes to the duties tests, many HR professionals are advising an audit of the duties component. Common “white collar” exemptions include executive, administrative, and professional:
If you think the increase in the salary threshold and the FLSA rules are a bit dull and unrelated to your company, think again. Misclassification and improper payment of overtime and other wage and hour issues carry steep penalties.
In fact, the DOL recently announced it recovered a record $322 million in unpaid wages in fiscal year 2019.[iii] This surpasses the previous all-time high set in fiscal year 2018 by $18 million. More than $1.5 billion has been recovered in the past five years.
The IRS announced increased limits for 401(k), 403(b), most 457 plan contributions in 2020.[iv] As the update came quite late in the year, plan sponsors may be scrambling to modify their systems for the new year and inform employees of the updated limits. At this late stage, many employers have already provided benefit materials and may need to consider an addendum or other notification option.
For 2020, employees can contribute $19,500 in contributions, an increase of $500. The combined employer and employee contribution limit will increase by $1,000 to $57,000. For participants ages 50 and over, the additional “catch-up” contribution limit will increase to $6,500, up by $500. The limitation for SIMPLE retirement accounts increased to $13,500, up from $13,000 for 2019.[v]
Minnesota employers must be prepared for the increase in minimum wage, effective January 1, 2020.[vi] The large employer minimum wage will increase to $10 per hour (from $9.86). The small employer limit will increase to $8.15 per hour (from $8.04).
A large employer is any enterprise with an annual gross revenue of $500,000 or more. Don’t forget to also update the required Employment Law Poster.
Reference our previous posts for information on Duluth’s Earned Sick and Safe Time requirements, effective January 1, 2020.
This is a mere summary of changes to complex laws. It is important for employers to review the requirements in full and seek out help as needed to ensure compliance.
HR thought leader, Stacy Johnston, provides innovative HR solutions with a mission to support organizations in understanding and engaging their biggest competitive advantage… their employees. Johnston writes and speaks about contemporary HR topics. She is a licensed attorney and holds the SHRM-CP and PHR credentials.
Interested in ongoing HR expertise, compliance assistance or more HR tips?
Check out our online resources or reach out to us for a free and confidential consultation at info@audacityhr.com.
[i] https://www.dol.gov/whd/overtime_pay.htm
[ii] https://www.dol.gov/whd/overtime2019/index.htm
[iii] https://www.dol.gov/whd/data/ According to the DOL, the average wage recovered per employee was $1,025.
[iv] https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19500-for-2020-catch-up-limit-rises-to-6500
[v] Visit the IRS website for details on the increased contribution amounts.
[vi] https://www.dli.mn.gov/business/employment-practices/minimum-wage-minnesota
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