Any business with at least one employee has an obligation to understand and apply wage and overtime laws as they apply to both employers and employees. In Kentucky, business owners, managers, HR professionals, and payroll professionals must know and apply both state and federal wage and overtime laws, taking the most stringent path when there are differences between the two.
KENTUCKY MINIMUM WAGE
Kentucky doesn’t govern minimum wage at a state level. This means that Kentucky employers must defer to the federal minimum wage, which is $7.25 per hour. In states that do govern the minimum wage, an employer should stay abreast of both state and federal minimum wages and use whichever number is higher.
KENTUCKY OVERTIME SALARY REQUIREMENTS
Kentucky wage laws are unique when it comes to overtime. They require employers to pay overtime at 1.5 times the regular rate in two scenarios:
- for any hours worked over forty (40) in a single workweek
- for any hours worked on the seventh consecutive day in a workweek
Certain employees may be classified as exempt from overtime rules, but the guidelines are narrow. This fact sheet published by the U.S Department of Labor’s Wage and Hour Division is helpful in describing who is exempt and this rule provides additional detail. Common employer mistakes include failing to pay overtime for eligible worked hours, misclassifying non-exempt employees as exempt, and assuming that all salaried employees are also exempt – which isn’t always the case. It’s also important to note that the employee must meet both the salary test and the duties test in order to be classified as exempt.
CHANGES AND TRENDS
The most notable recent change in wage and hour law in Kentucky relates to exemption criteria. On January 1, 2020, the United States Department of Labor increased the minimum salary for an exempt employee from $23,660 to $35,568 per year. This means that even if employees meet the duties test, their salary must also be at least $35,568 per year in order to be classified as exempt from overtime.
The Department of Labor is projecting another proposed change to the overtime rule, which has been delayed multiple times. Employers should begin to consider and plan for another increase in the minimum salary for exemption as the rule progresses. As many organizations learned in January of 2021, even a small increase in the minimum salary can have significant administrative and financial impact on an organization employing exempt workers who fall below the new threshold. Early planning and risk mitigation can help employers circumvent detrimental consequences.
IMPORTANCE OF COMPLIANCE
Wage and hour violations are serious and can lead to legal action, audits and investigations, civil penalties, back wages, damages, and even license suspension or revocation. Violations occur when an employee works for less than minimum wage or does not receive overtime pay for hours that meet overtime criteria. The United States Department of Labor recovered over $3 billion in wages for employees who experienced violations like this between 2017 and 2020 alone.
If you employ workers in Kentucky, you’ll have to comply with both state and federal minimum wage and overtime rules, including the unique seventh day overtime requirement. Violations – even when unintentional – can be costly and detrimental to your company. Partnering with a knowledgeable payroll provider like ASAP Payroll can help ensure you’re meeting all wage and overtime obligations.
Ready to automate time tracking and payroll to ensure minimum wage and overtime rules are applied consistently across the organization? ASAP Payroll is here to help with innovative cloud-based solutions and human resource knowledge and expertise. Get started today!