FLSA Overtime Minimum Salary Increase
Beginning December 1, 2016, millions of workers will be eligible to receive overtime wages. The U.S. Department of Labor has updated certain definitions for exempt employees under the FLSA (Federal Labor Standards Act). Consequently, the new federal rule increases the threshold FLSA overtime salary requirement for exempt workers to $47,476. Also, the new “Final Rule” include an increased threshold for “high-wage earners” and an automatic update to these threshold amounts every three years.
While you may earn a salary at or above the new threshold FLSA overtime salary requirement, you may not be an exempt employee. Exemptions are determined based on each specific employment situation. Thus, job titles alone do not determine the exempt or non-exempt status of any employee. Rather, specific job duties performed by an employee and the compensation received determine exempt status. To be properly classified as exempt from overtime, an employee must satisfy other exemption requirements under the FLSA and state labor laws. The most common exemptions include the Executive, Administrative, and Professional workers exemptions.
The Executive Employee exemption focuses on employees whose primary duties involve managing the business or managing a recognized department or subdivision of the business.
- First, the Executive employee must customarily and regularly direct the work of at least two or more full-time employees, and
- The executive employee must also have the authority to hire or fire other employees. Alternatively, the employer must give the employee’s suggestions and recommendations regarding personnel decisions particular weight.
- Consequently, a properly classified Executive employee would typically include those involved in interviewing, selecting, and training new employees, setting out policies for rates of pay and hours of work, directing work of employees, determining what methods or techniques to be used by employees, and related categories.
- “Highly Compensated Employees” (“HCE” – currently $100,000 annual compensation, increasing to $134,004) may be properly classified as an Executive employee if they regularly perform at least one of the duties of an Executive employee.
The Administrative Employee exemption focuses on employees whose primary duties involve the performance of non-manual work directly related to the management or general business operations of the employer or the employer’s customers.
- Such employees must also include the exercise of discretion and independent judgment on matters of significant.
- A properly classified Administrative employee includes those with the authority to formulate or implement management policies or operating practices; an employee who carries out major assignments in conducting the operations of the business; an employee who employee performs work that affects business operations to a substantial degree; or an employee who has authority to commit the employer in matters that have significant financial impact.
- An HCE may be properly classified as an Administrative employee if they regularly perform at least one of these duties.
The Professional Employee exemption focuses on employees whose primary duties involve the performance of work requiring advanced knowledge. Such work must be predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment.
- Such employees must have advanced knowledge in a field of science or learning,
- Such employees must have acquired this advanced knowledge by a prolonged course of specialized intellectual instruction,
- A properly classified Professional employee may include a doctor, attorney, architect, writer, actor, artist, pharmacist, and an accountant.
- An HCE may be properly classified as a Professional employee if they regularly perform at least one of these duties.
If you have questions about changes to the FLSA overtime salary, exemptions, or need a consultation about your rights to overtime pay, Skilling O’Leary is here to help.