On May 18, the Labor Department made drastic changes to the Fair Labor Standards Act’s (FLSA) overtime rules for certain administrative and professional executive employees.
The FLSA contains a so-called “white collar” exemption, which applies to certain executive, administrative, and professional employees.
Under this exemption, employees with certain job duties, paid on a salary basis, and earning at least $455 weekly ($23,660 per year) were not entitled to overtime pay if they worked over 40 hours in a work week.
The Labor Department’s newly adopted rules updated the $455 weekly salary threshold to $913, or $47,476 per year. This is the first update since 2004.
While the final number is a few thousand dollars short of what was initially proposed, the impact will be sweeping.
The Labor Department estimated that, under the new rules, 4.2 million currently exempt employees will become eligible for overtime pay.
As an example, the new rules mean that an employee otherwise meeting the “white collar” exemption requirements, but who is paid a $45,000 annual salary, would be entitled to overtime wages if the employee works over 40 hours in a work week.
Furthermore, the new regulations provide that the threshold will be updated every three years. The amount of the change will be pegged to the salary growth in the lowest income region of the country.
Given these upcoming changes, employers should review their employees’ duties and compensation.
If appropriate, employers should consider increasing certain employees’ salaries, and/or updating employees’ duties, to continue qualifying for the “white collar” exemption.
FOS’s attorneys can help you understand these new rules and make informed choices regarding your employees.