North Carolina overtime laws regarding the entitlement of employees to overtime premium pay just had a rule update becoming effective at the start of the year, January 1st of 2020. The U.S Department of Labor released the final version of the rule that, in effect, makes more salaried employees eligible for overtime pay. These new overtime rules for exempt employees were released in its current form on September 25, 2019, and it became effective at the start of 2020.
How Does the North Carolina Overtime Laws Affect Workers?
One of the biggest changes in this new set of rules is the exempt employee changes – specifically, the increase in the amount that an employee must earn to be considered exempt from overtime pay,
If your homeowners association currently people in any capacity, including for maintenance or HOA management reasons, you’ll be impacted by the new Fair Labor Standards Act (FLSA) overtime rule that went into effect on January 1st, 2020.
If you have questions or are unsure of exactly how the new rule will impact your association, this article will shed some light on the matter. It’s important as a board member to be informed about the changes in North Carolina labor laws that will be made and what your options are.
North Carolina Overtime Laws, New Exemption Threshold and HOAs
NC overtime laws are covered by the Fair Labor Standards Act, which states that an employee is eligible to receive overtime pay at 150% of their regular rate for each hour they work past 40 hours in a week. That is unless they fall into a category exempt from this eligibility. NC labor laws for salaried employees have a few such exemptions currently in place. Overtime compensation time for salaried employees normally starts after 40 hours a week, but for exempt employees, they don’t get this overtime premium pay.
NC labor laws overtime pay exemptions are generally applied under two test categories.
The first category is the duties test. Under North Carolina overtime laws, an employee is considered exempt and not entitled to overtime pay if they satisfy two conditions. The employee should be in a salaried position in order to be exempted from overtime pay. Then, that position should also meet the criteria of the professional duties test, or the administrative duties test, or those of the executive duties test.
Employees who fall under categories that satisfy the above criteria are generally considered exempt and are not entitled to receive the premium overtime pay rate even after working past 40 hours in a week.
However, employees who are exempt under the duties tests can still be eligible for overtime pay, if they fall under the second test category: the salary basis test. Under the salary basis test, the above exemption will not apply to a salaried employee that is considered “low-paid.”
The exempt employees changes for low-paid positions, under North Carolina overtime laws, have seen an update following the new rule that went into effect on January 1st of 2020.
North Carolina Overtime Laws Low-Paid Exemption: Before and After
An update to the overtime rule, which determines employees that are eligible for overtime, was announced earlier in 2019 by the U.S. Department of Labor. After the rule went into effect on January 1, 2020, an employee will have to be making over $684 a week to be exempt from premium overtime pay.
That means anyone making less will have to track their hours worked and for any hours worked over 40 per week, they will need to be paid overtime.
This is a sizable increase from the previous $455 per week threshold for the salary basis test. Looking at it on an annual pay basis, the new exemption rules now mean that salaried employees earning less than $35,568 a year are eligible for premium overtime pay, even if their position falls under the duties test criteria.
Previously, only the salaried employees earning less than $23,600 per year get to enjoy premium overtime pay under these conditions.
North Carolina Overtime Laws Highly-Paid Exemptions
The new overtime rules for exempt employees have an effect on highly compensated employees, as well. By January 1st, 2020, the minimum salary needed to make a highly-compensated employee exempt from premium overtime pay has increased to $107,432 per year. This is a sizable increase from the old threshold of $100,000 a year.
North Carolina Overtime Laws: Other Changes
Aside from increasing the minimum salaries necessary for employees to be exempt from overtime, the new final rule from the U.S. Department of Labor only adds a few details that impact HOAs.
In particular, employers are now allowed to include nondiscretionary bonuses of up to 10% of the salary level minimum.
Other than that, the new rules made no changes to professional duties, administrative duties, or executive duties tests. There have been no changes to the other rules when it concerns the overtime and compensation time for salaried employees, either.
Changes in Your Association
These changes in the North Carolina overtime laws will undoubtedly change some things in your HOA, so it’s important to be prepared for your next steps.
To make sure you’re in line with the new regulations, you’ll need to either 1) keep the employee in question at the wage they’re already earning but make them eligible for overtime since they will have to become hourly or 2) increase the employee’s salary to the new thresholds that will meet the overtime exemption minimums.
The first option is not necessarily a possibility. If you hire someone in a professional position, such as a manager for your community, they must remain a salaried employee because of their fiduciary responsibilities and management duties. That means you might be increasing your costs quite a bit per person.
The best initial course of action now is to have your board assess current staff members to figure out the cost increase you’ll be facing from higher salaries or more overtime.
Then, consider how you can offset higher costs through expenses or higher assessments. If need be, the board can have a meeting to discuss the changes in the North Carolina overtime laws that just went effective on January 1, 2020. Come up with a plan of action before speaking with the employees who will be affected by this change so you’re prepared to be open with them and explain what happens next for them.
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