Two changes to overtime rules are on the horizon in 2020.
The first is a done deal – and you’ll need to comply with it come January 1, 2020. The Federal Department of Labor is changing the parameters of when you have to pay overtime, effective January 1, 2020.
Under this new rule, your employees are and still will be EXEMPT from overtime if they pass BOTH the salary test and the duties test. The duties test remains the same; you can find the criteria here. In the restaurant industry, this test usually applies to supervisors and managers.
The salary test is changing.
Beginning January 1, 2020, employees must be paid a salary of AT LEAST $684 per week (which equates to $35,568 annually) to be EXEMPT from overtime. This is up from $455 per week (or $23,660 annually) in 2019. Importantly, tips DO NOT count -- and hourly workers don't pass the test. Put another way, if your employee does not make a salary of at least $684 per week - not counting tips - you need to pay them time-and-a-half overtime if they work more than 40 hours in a week, or more than 12 hours in a single day.
Learn more from the Department of Labor. And if you have questions, contact our office at 303-830-2972.
The second change is still a proposal, but we expect it to move forward, going into effect July 1, 2020. The Colorado Department of Labor and Employment has drafted a major revamp of the Colorado Overtime and Minimum Pay Standards Order.
Under this proposal, exempting an employee from overtime would still require that they meet the duties test, which is not materially changing with this proposal. The duties test in restaurants usually applies to supervisors and managers – but you can find exemptions here.
The salary test, however, would change fairly dramatically: On July 1, 2020, salaried workers will be eligible for overtime pay unless they make more than $42,500 per year. That amount will adjust by $3,000 a year until it reaches $57,500 in 2026. After that, the cap will adjust based on the area consumer price index. Tips DO NOT count toward the salary threshold -- and hourly workers don't pass the test.
If this proposal moves forward, starting July 1, 2020, you will need to pay overtime to salaried employees who make less than $42,500 annually. In the restaurant industry, we expect this will most affect supervisors and managers – forcing restaurateurs to either give a raise to these positions or demote them to hourly jobs and cut hours.
Give your feedback on how this will affect your business to firstname.lastname@example.org by December 31, 2019. And contact our office if you have questions.
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