FAIR LABOR STANDARDS ACT are “ white-collar ” exemptions . These exemptions mainly apply to EAPs but include outside sales personnel and certain computer and highly compensated employees ( HCEs ).
To qualify for a white-collar exemption , an employee must satisfy the following tests :
• The salary basis test ensures the employee is paid a predetermined and fixed salary that is not subject to reduction due to variations in the quality or quantity of work .
• The salary level test confirms that the employee meets a minimum specified amount to qualify for the exemption . The current salary threshold is $ 684 per week ($ 35,568 per year ) for EAPs and $ 107,432 per year for HCEs . The current salary threshold took effect on Jan . 1 , 2020 .
• The duties test requires that the employee ’ s job duties conform to EAP duties . To satisfy the duties test , an employee ’ s actual work responsibilities must match the description the FLSA assigns to the exemption .
PROPOSED FLSA OVERTIME RULE
The proposed rule doesn ’ t impact the duties test for the white-collar FLSA exemptions . The DOL is proposing to increase the standard salary level from :
• $ 684 to $ 1,059 per week ($ 35,568 to $ 55,068 per year )
• $ 107,432 to $ 143,988 per year for highly compensated employees
The rule would enable the DOL to update salary levels automatically every three years without having to rely on the rulemaking process .
With this substantial increase , more workers will likely qualify for overtime pay . However , significant changes to the salary threshold will likely result in legal challenges to the DOL ’ s new overtime rule , which could delay the implementation of any rule changes .
PREPARING FOR THE NEW OVERTIME RULE
While the proposal doesn ’ t impose any new requirements on employers at this time , employers should become familiar with the FLSA ’ s proposed rule and evaluate what changes they may need to adopt if the rule is implemented as proposed . These include determining whether to increase employees ’ salaries to maintain their exempt classification or reclassify exempt employees to nonexempt status and pay them overtime for all hours worked over 40 in a workweek , as well as auditing exempt employees ’ job duties .
REVIEWING EMPLOYEE COMPENSATION
With the anticipated increase to the overtime exemption threshold , employers can review their employees ’ compensation to determine which of their employees may be impacted . After reviewing affected employees ’ salaries , employers can prepare for any salary increases and how those increases could impact the broader organization . If the overtime rule becomes final , employers can then decide whether to increase affected employees ’ salaries to the new threshold to remain exempt or convert them to nonexempt employees .
AUDITING EXEMPT EMPLOYEES ’ JOB DUTIES
An employee ’ s job title is not determinative of whether they are exempt under the FLSA . Therefore , to prepare for the new overtime rule , employers can audit their exempt employees ’ job duties to determine whether the duties and responsibilities those workers are actually performing satisfy the FLSA ’ s duties test for the white-collar exemptions . Employers can then update employee job descriptions and duties to accurately reflect the work those employees perform .
Many states and even some localities have their own overtime requirements that differ from the FLSA . To avoid potential violations and penalties , employers need to be familiar with all laws that apply to their organizations . Employers are encouraged to seek legal counsel to discuss specific issues and concerns .
EMPLOYER TAKEAWAYS
The general public will be allowed to comment on the proposal once it ’ s published in the Federal Register . If the DOL ’ s overtime rule becomes final , it will significantly impact most employers . Employers might use this proposed rule as an opportunity to revisit their exemption determinations more broadly . Understanding the FLSA ’ s proposed overtime rule and its potential impacts allows employers to prepare , adapt , and set their organizations up for long-term success .
For more workplace resources , contact Spectrum Insurance Group today . +
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