New overtime regulations of the Fair Labor Standards Act (FLSA) were set to become effective on Dec. 1, but an injunction by a federal judge in Texas has blocked its implementation for the time being. The Department of Labor has responded with a notice of appeal to the federal court. It is still uncertain how this will play out, but the rules might still become effective at some point.
Employers are now forced to play a waiting game. With this in mind, it could be a good time to prepare for practical solutions and go over proactive steps with an insurance advisor and/or legal counsel.
Quick overview of the new rules
While the new FSLA mandate is often referred to as the “Overtime Rule,” it is important to note that it does not address how overtime is paid. The major change in the law is in the minimum amount an employee must earn to be considered exempt from overtime pay. Currently, in order to be considered exempt (what’s commonly know as “salaried”), an employee must satisfy the following three tests:
1. Salary-level test: Employees must earn a weekly salary that meets the minimum requirements. This salary requirement is currently set at $455 per week.
2. Salary-basis test: Regardless of the quality or quantity of the work, employees must receive their full salary for any week they perform their work.
3. Duties test: Your employee’s primary duties must meet requirements set by the Department of Labor. For more info, check the DOL’s site.
Salary threshold would more than double
If the proposed FLSA overtime rules were to go into effect, the salary threshold for exemption from overtime pay would be more than doubled. Currently, salaried employees who earned less than $455 per week ($23,660 annually) are entitled to overtime compensation regardless of their duties.
Under the new rule, the threshold would be raised to $913 per week ($47,476 per year). This means that any employee making less than $47,476 annually could not be classified as exempt. The impact would be monumental for businesses when considering the current number of exempt administrative and service employees (to name two job categories) with annual salaries between $23,660 and $47,476. The Department of Labor estimates 5 million workers would be affected by the new regulations.
Additionally, the minimum salary requirements for employees exempt from overtime pay under the “highly compensated” exemption would increase from $100,000 to $134,004 per year. These are employees who are considered exempt because they customarily and regularly perform at least one of the exempt duties of…