New Salary Requirements for the White Collar Overtime Exemptions

The Fair Labor Standards Act (FLSA) states that “covered employees” must receive overtime pay for those hours worked that exceed 40 hours in one workweek. In fact, the FLSA also outlines the rate of pay – one and one-half times your regular rate of pay. There are some exceptions to this rule.  

The FLSA passed in 1938 and has remained a United States labor law since then. As described above, the law creates and maintains the right to a minimum wage, and “time-and-a-half” overtime pay when people work over 40 hours in a workweek. The FLSA also contains provisions to regulate the employment of minors, i.e. child labor laws.  

The FLSA covers employees through enterprise coverage or individual coverage.  Enterprise coverage includes employees who work for businesses that have annual business of $500,000 or more, or those who work for companies providing residential medical or nursing care, hospitals, government agencies, and schools.  Individual coverage applies to employees involved in any type of interstate commerce. This includes the production of goods that are transported to other states, work that involves traveling to or calling other states, or work in any capacity in a business that engages in commerce between states.  Regardless of the method, virtually every US employee is covered by the FLSA.

Exempt employees do not qualify for overtime pay and generally speaking, the most common exemptions require that an employee be paid a salary in order to be eligible for the exemption. However, simply paying an employee a salary is not enough to make the employee exempt from the FLSA’s overtime requirements. In addition, a recent update to a federal Department of Labor regulation increased the salary requirements for certain exemptions.

The New Department of Labor Rule

The update to the regulation increased the salary requirements used to determine whether salaried employees are exempt from the FLSA’s minimum wage and overtime pay protections. Under the so-called “white collar exemptions,” an employee is exempt if he or she is employed in a bona fide executive, administrative, or professional capacity, as defined in the Department of Labor’s regulations at 29 CFR part 541. 

Before the change was announced in May, employees who earned at least $23,660 per year would not qualify for overtime. However, starting January 1, 2020, that amount increased to $35,568 annually, or $684 per week. 

Employers can use non-discretionary bonuses and incentive payments for up to 10% of this approved salary level if the payments are made at least annually. Employers should review the salary of any employees they currently classify as exempt using the “white collar” exemptions.

An Employment Attorney Can Help

For employers, understanding the FLSA is critically important. The ever-changing landscape of new rules and regulations can make it tricky to know if your business is doing everything right. The employment law professionals at Simon | Paschal, PLLC are equipped to help your business stay abreast of the latest updates with regards to overtime pay and the FLSA.

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