On September 24, 2019, the U.S. Department of Labor (DOL) issued its final overtime rule as it relates to the minimum salary threshold for exempt employees. The DOL estimates that 1.3 million workers will be eligible for overtime pay as a result of its final rule.  Here is how the new rule will impact workers in Connecticut, Massachusetts and New York.

Through the end of 2019, the federal Fair Labor Standards Act (FLSA) requires that white-collar exempt employees (professional, executive and administrative employees) be paid at least $455 per workweek ($23,660 annually for a full-time worker). Traditionally, Connecticut’s salary threshold for exempt workers has been higher than that required under federal law. Connecticut’s short test for exemptions required a salary basis of $475 per week ($24,700 annually).  The new federal rule, which will take effect on January 1, 2020, raises the minimum salary threshold to $684 per week ($35,568 annually for a full-time worker). So as of January 1, 2020, federal law will outpace Connecticut with regard to the salary threshold for exempt employees.  As a result, exempt employees who are currently being paid less than $684 per week will need to have their salaries increased to meet this new threshold if the employer wishes to maintain the employee’s exempt status and avoid overtime exposure.  The new salary threshold is in line with the DOL’s proposal from earlier this year, which we blogged about here.

White collar exemptions under Massachusetts law are based on the salary and duty tests applied under the FLSA. So, exempt employees in Massachusetts will also have to be paid at the new higher salary threshold beginning January 1, 2020.

The federal increase in the white collar exemptions’ salary threshold has no effect on private sector employees in New York State, which uses tiered salary thresholds depending on where an employee works in the state. In New York City, large employers (11 or more employees) are required to pay exempt employees a minimum of $1,125.00/week.  Smaller employers in New York City are required to pay at least $1,012.50/ week ($1,125/week after December 31, 2019).  In Nassau, Suffolk and Westchester counties, the minimum salary threshold is $900/week ($975/week after December 31, 2019).  In the rest of New York State, the salary threshold is still higher than the new federal requirement, and requires employers to pay $832/week ($885/week after December 31, 2019).

The DOL’s new regulations also make changes to the “highly compensated employee” exemption, but Connecticut, Massachusetts and New York do not recognize this exemption for private sector employees.

Treatment of Nondiscretionary Bonuses and Incentive Payments

In recognition of evolving pay practices, the final rule permits employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to ten (10) percent of the standard salary minimum. For employers to credit nondiscretionary bonuses and incentive payments toward satisfying a portion of salary test, they must make such payments at least annually.

Next Steps:

Employers should identify employees impacted by the new rule and determine whether it makes sense to raise their salaries to meet the new salary threshold, thus maintaining these employees as exempt. In circumstances where increasing the salary does not make economic sense, employers will need to consider whether to maintain these newly reclassified employees as salaried nonexempt workers or convert them to hourly staff.

Communication throughout this process will be key. Reclassified employees often feel that they have been demoted, so employers will need to have a communication strategy in place to inform employees that any changes are based on new government rules.

To recap,

 In Connecticut and Massachusetts, effective January 1, 2020:

  • Exempt white-collar employees must be paid a guaranteed salary of at least $684 per workweek.

In New York, effective January 1, 2020, the salary threshold will increase as follows:

  • All New York City exempt employees must be paid at least $1,125.00/week, regardless of the size of their employer.
  • Nassau, Suffolk and Westchester county exempt employees must be paid at least $975/week.
  • Exempt employees in the rest of New York State must be paid at least $832/week.

For more information regarding how the DOL’s new rule will impact your organization, contact an attorney in Murtha Cullina’s Labor and Employment Group.

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Photo of Patricia E. Reilly Patricia E. Reilly

Patricia E. Reilly is an experienced litigator who represents clients in a wide range of cases including, employment discrimination and related torts, non-compete and restrictive covenants, wage and hour, breach of contract, unfair trade practices, and business disputes. In addition to maintaining a…

Patricia E. Reilly is an experienced litigator who represents clients in a wide range of cases including, employment discrimination and related torts, non-compete and restrictive covenants, wage and hour, breach of contract, unfair trade practices, and business disputes. In addition to maintaining a thriving litigation practice, Tricia counsels clients on a variety of employment-related issues including hiring, firing, and discipline; wage and hour; state and federal FMLA; sexual harassment investigations and prevention; Title IX; pregnancy and disability accommodation; and avoidance of employment discrimination liability.

Tricia is listed as a leading Labor and Employment Lawyer in Chambers USA.  She is listed in Best Lawyers in America®, and in 2017, Best Lawyers in America® recognized her as “Lawyer of the Year”, New Haven, Litigation – Labor and Employment. Tricia is a member of the American Bar Association, the Connecticut Bar Association and the New Haven County Bar Association.  She received her B.A. from Wesleyan University and her J.D. from University of California, Berkeley School of Law.

Photo of Salvatore G. Gangemi Salvatore G. Gangemi

Salvatore G. Gangemi is a Partner in the Litigation Department of Murtha Cullina and a member of the Labor and Employment Practice Group. He advises clients with respect to state, federal and local employment laws. In addition, he litigates matters involving misappropriation of…

Salvatore G. Gangemi is a Partner in the Litigation Department of Murtha Cullina and a member of the Labor and Employment Practice Group. He advises clients with respect to state, federal and local employment laws. In addition, he litigates matters involving misappropriation of trade secrets, restrictive covenants, breach of employment contract, fiduciary duty, and other work-related common law claims. Sal also counsels clients on day-to-day issues involving workplace management and administration, including requests for reasonable accommodation for disabilities, for family and medical leave, and wage and hour issues.  He conducts employment law training on a variety of topics, including sexual harassment prevention and wage/ hour compliance.  He also drafts employment policies and agreements, and assists clients in auditing worker classification practices and policies both in the context of the Fair Labor Standards Act and state laws governing independent contractor determinations.

Photo of Martha M. Royston Martha M. Royston

Martha Royston is an Associate in the Litigation Department and the Labor and Employment Practice Group.

Martha represents employers in a wide variety of cases, including claims of discrimination and retaliation; breach of non-compete and restrictive covenants; and wage and hour violations.  She…

Martha Royston is an Associate in the Litigation Department and the Labor and Employment Practice Group.

Martha represents employers in a wide variety of cases, including claims of discrimination and retaliation; breach of non-compete and restrictive covenants; and wage and hour violations.  She litigates matters before the Commission on Human Rights and Opportunities (CHRO) and in state and federal court, and assists employers with audits and investigations by governmental agencies such as the Connecticut Department of Labor (CT DOL) and the Occupational Safety and Health Administration (OSHA).

Martha also counsels employers on best practices and helps management and human resources professionals navigate personnel issues, including employee discipline; termination and separation; employee leave; and reasonable accommodations.  She drafts employee handbooks and assists employers with crafting personnel policies that suit their particular needs.