Article as posted in the Central Bucks County Chamber of Commerce W4 Magazine Late Fall 2016
By: Kyong Ha Growney, Esquire
In May of 2016, the U.S. Department of Labor (“DOL”) published a final rule implementing new minimum salary thresholds for “white collar” exemptions under the Fair Labor Standards Act (“FLSA”). On November 22, 2016, a federal judge in Texas issued a nationwide injunction halting the implementation of DOL’s final rule. On December 1, 2016, the DOL appealed this decision to the 5th Circuit. It is unclear at this time what the courts will decide.
The DOL final rule was scheduled to take effect on December 1, 2016 and would have dramatically increased the salary level required for the “white collar” exemptions. The salary level would have more than doubled from its current amount of $455 per week or $23,660 per year to $913 per week or $47,475 per year. Under DOL’s final rule, employees who are classified as salaried exempt employees and ineligible for overtime pay would have become eligible for overtime pay for any hours worked over 40 in a workweek if they do not make at least $913 per week or $47,475 per year.
Before the November 22, 2016 injunction, employers started the process to increase salary levels for exempt employees or reclassify current exempt employees as non-exempt employees to meet the requirements of DOL’s final rule in time for the December 1, 2016 implementation date. With the November 22, 2016 injunction putting the DOL final rule on hold, employers are now faced with the difficult decision of continuing with the raises or reclassification of employees or holding back on any implementation until there is further guidance from the courts.
While some employers have moved forward with the planned changes for employee morale and other reasons, other employers have decided to take a wait and see approach. Either way, employers should be mindful of the fact that the minimum salary requirement is only one part of the exemption test. In order to qualify for “white collar” exemptions and be exempt from overtime pay, employees must generally meet the following tests:
- They must be paid on a salary basis not subject to reduction based on quality or quantity of work (“salary basis test”); and
- Their salaries must meet a minimum level, which is currently $455 per week or $23,660 per year (“salary level test”); and
- Their primary job duties must involve the kind of work associated with exempt executive, administrative, or professional employees (“standard duties test”).
Therefore, even if the DOL final rule is never implemented, employers should still take a hard look at the way they classify employees and ensure that they are in compliance with all existing overtime rules.
Kyong Ha Growney, Esq. serves as Partner and Chair of the Employment and Labor Law Section of Curtin & Heefner LLP. She can be reached at firstname.lastname@example.org or (267) 898-0570.