The Cost of Employees in Nevada

For those of you who have employees in Nevada, you likely know that starting July 1, 2020, the minimum wage is beginning its ascent to $12.00 per hour.  More significant than the increase to the minimum wage is the new Fair Labor Standards Act (FSLA) revision which becomes effective on January 1, 2020.

The FSLA is the law that divides employees into exempt (salary) and non-exempt (hourly) employees.  The FSLA requires all hourly employees to be paid overtime for all hours worked at 1.5 times the employee’s regular rate of pay.

Currently, the minimum salary that you can pay an employee and not be required to pay overtime is $455 per week or $23,660 per year.  As of January 1, 2020, that amount will increase by 50% to $684 per week or $35,568 per year (as will all things, the rates for these are higher in California).  These standards apply regardless of the number of employees you have.

Under the new rule, up to 10% of the minimum salary may be paid as non-discretionary bonuses, commissions and other incentive pay.  However, please know that this is a trap for unsuspecting employers. 10% must be non-discretionary.  Thus, service award, holiday bonuses, costs of meals, lodging and other benefits do not count.  Where does the trap come in?  If you do the math wrong or do not pay one of the bonuses, you may be liable for an entire year’s worth of overtime.  Thus, if you miss the threshold by even one cent, you may be liable for hundreds or thousands of dollars. Furthermore, if you miss it for one employee, you open yourself up for an audit (and monetary damages) for all of your employees.  

As it relates to enforcement, your business has to fight this battle on two fronts.  First, the Department of Labor is incentivized and expected to hit record high enforcement levels in 2019 and thereafter.  Second, in just 2017, the top 10 employment-related lawsuits (in private lawsuits) had a combined value of $2.72 billion. Those private lawsuits open employers to monetary damages based upon back-wages; liquidated damages and attorney’s fees.

So, what should you do?  You have the choice of increasing salary or reclassifying your employees.  Beyond a simple math exercise, you need to determine if your employees are truly exempt or non-exempt.  The amount of compensation is only one test. You need to evaluate whether your employees satisfy the “duties test” to determine whether they are truly exempt.  An overview of the duties test can be found here: https://www.dol.gov/whd/overtime/fs17a_overview.pdf.

As with everything, Gordon Law recommends that you properly document your determination for exempt employees.  You may do this within job descriptions, surveys and/or summaries of interviews with staff showing how their respective jobs are determined to be exempt.  For non-exempt staff, you will need to keep records of all time and compensation to ensure that the overtime rules are satisfied.    

You have a very short window to ensure that your compensation schedules are compliant with federal law.  As always, should you have questions or need assistance with implementation, Gordon Law is here for you.