TIA Comments on Overtime Rule

Oct. 2, 2019

A U.S. Department of Labor rule about overtime pay "will have a significant impact on many businesses," according to Tire Industry Association (TIA) officials.

The rule, which goes into effect Jan. 1, 2020, updates the earnings thresholds necessary to exempt executive, administrative and professional employees from the Fair Labor Standards Act's minimum wage and overtime pay requirements.

In a legislative update sent to TIA members earlier this week, association officials said that due to the rule, "businesses that have employees who were previously classified as exempt but who do not earn enough to meet the new salary thresholds will have to decide whether to reclassify these employees as non-exempt - in which case they will be eligible for overtime - or to increase their compensation to meet the new thresholds.

"From a financial standpoint, this will largely require businesses to make an employee-by-employee assessment of the amount of overtime that a particular employee works versus the amount that the employee's salary would need to be increased to meet the new threshold.

"Businesses can, of course, 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 40 hours per week. For employers who do end up reclassifying employees as nonexempt, 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 test, businesses that are evaluating employee exemptions will also want to make sure that all employees that they are classifying as exempt meet both the preexisting duties test and the new salary thresholds."

More than one million workers will be eligible for overtime pay thanks to the rule, which will:

* Raise the standard salary level from the currently enforced level of $455 per week to $684 per week, which is equal to $35,568 per year for a full-year worker;

* Raise the total annual compensation level for "highly compensated employees" from the currently enforced level  of $100,000 per year to $107,432 per year, and;

* Allow employers to use "non-discretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices," according to Department of Labor officials.

The rule also will revise special salary levels for workers in U.S. territories.