New FLSA Regs on Exemption from Overtime Pay
New
"Salary-Test" Regulations set the Monetary Bar Significantly Higher on
Whether a Salaried Employee Performing Executive, Administrative or
Professional Duties is Exempt from the FLSA’s Overtime Pay Requirements.
December 1st
marks the effective date of new regulations under the Fair Labor
Standard Act (FLSA) that raise the minimum threshold for determining
whether certain salaried employees must be paid overtime for hours
worked in excess of 40 in a workweek.
Promulgated by the United States Department of Labor,
those regulations (81 FR 32391) provide that a so-called “white collar”
or “EAP” employee must earn a salary not less than $47,476 per year to
be “exempt” from receiving overtime pay to which "non-exempt" employees
are entitled..
There are two general components to determining
whether an employee is “exempt”: the “salary test” and the
“duties” test. The regulations raise the eligible “salary” test to
$913 per week, a figure equal to the 40th percentile of
earnings for full-time salaried workers in the lowest-wage Census Region
(currently the South). The salary threshold was last updated in 2004
when it was set at $455 per week.
The “duties” test is not affected by the new
regulations and remains the same; namely, to qualify for exemption, the
employee must perform “executive, administrative or professional” duties
in his or her job. Although the categorization of the “EAP”
exemptions can be comparatively complex and warrant consultation with an
attorney, in a nutshell they are broadly defined as follows:
- An “Executive” employee must have a
primary duty of managing the enterprise or a department or subdivision
of the enterprise, customarily and regularly direct the work of at least
two employees, and have the authority to hire or fire, or to recommend
hiring/firing.
- An “Administrative” employee’s primary
duty must be performing office or non-manual work directly related to
the management or general business operations of the employer or
employer’s customers; his or her her duties must include exercising
discretion and independent judgment with respect to “matters of
significance.”
- A “Professional” employee must have a
primary duty of (1) work requiring knowledge of an advance type in a
field of science or learning customarily acquired by a prolonged,
specialized, intellectual instruction and study, or (2) work that is
original and creative in a recognized field of artistic endeavor, or (3)
teaching in a school system or educational institution, or (4) work as a
computer systems analyst, computer programmer, software engineer or
other similarly-skilled worker in the computer field. This exemption
pertains to work that requires the consistent exercise of discretion and
judgment, or requires invention, imagination, or talent in a recognized
field of artistic endeavor.
The new
regulations are also remarkable because they provide for automatic
updates to the salary threshold every three years. The first
update is scheduled for January 1, 2020, at which time it is currently
anticipated that the salary threshold will rise to $984 per week or to
$51,168 per year. The DOL’s intention is to avoid the salary
threshold from becoming outdated.
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