HR Minute: Overtime Exemption

By Claudia St. Johnovertime-clock-graphic

On Thursday, March 7, the Department of Labor announced its recommended revisions to the Fair Labor Standards Act (FLSA) “overtime rule.” If finalized, these revisions would increase the minimum salary level threshold for exempt employees from $23,660 per year (or $455 per week) to $35,308 per year (or $679 per week). This salary-threshold increase is expected to impact a million workers who could become non-exempt.

The FLSA mandates employees must be paid minimum wage for all hours worked and time-and-a-half their hourly wage for all hours worked over 40 in a workweek. However, it also establishes exemptions that make certain employees “exempt” from minimum wage and overtime pay obligations. These exemptions include executive, administrative, professional, computer, and outside sales, as well as some other specific groups.

Exempt employees must meet criteria including regularly performing exempt-level job duties and receiving a guaranteed wage of a certain amount. The latter is what the DOL is proposing to change.

These proposed revisions will also increase the salary level for employees under the “highly-compensated” exemption from $100,000 per year to $147,414 per year, as well as allow employers to credit some non-discretionary bonuses and incentive payments toward as much as 10 percent of an exempt employee’s salary level.

The good news is these revisions are not expected to change the current “exempt” duties criteria or tests.

These revisions are not yet finalized, so it is possible they will be overturned like the revisions issued in 2016, which never went into effect. However, while companies do not have to increase salaries immediately, they should be reviewing the compensation of their exempt employees to be prepared if this becomes law in a few months.

While companies only need to review and adjust salary levels at this point, employers may want to use the opportunity to verify that their exempt employees meet the duties expectations as well, in case the publicity brings more attention to exemption status (and therefore increased wage-and-hour claims) as after the 2004 revisions.

[Note: This impacts federal law only. Employers in states with different wage-and-hour laws must defer to whichever is more beneficial to the employee.]

Claudia St. John is President of Affinity HR Group, Inc., a national human resources consulting firm serving hundreds of clients nationwide. With more than 20 years of experience in human resources, employee engagement, and organizational development, she is an author and a frequent public speaker who contributes regularly to publications on the topic of human resources.

image courtesy of worktime