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FLSA Update
A Legal Moment

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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Philip Roth is a founding shareholder at Marshall, Roth & Gregory, PC. One of the firm's principal litigators, Philip's practice over the last twenty years has focused in part on employment law.

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