Yesterday the Department of Labor issued its new rule on FLSA overtime, raising the threshold for exempt status to $35,568, or $684 a week. This new overtime rule takes effect on January 1, 2020.
Under the current overtime rule, in order to designate an employee as exempt using one of the three “white collar” exemptions of executive, administrative or professional, an employee must earn at least $455 a week ($23,660 annually) and meet the duties test of at least one of the exempt categories. The duties test for each of the white-collar exemptions is as follows:
- Executive exemption. The employee's primary duty must be managing the enterprise or a department or subdivision of the enterprise. The employee must customarily and regularly direct the work of at least two employees and have the authority to hire or fire workers (or the employee's suggestions and recommendations as to hiring, firing or changing the status of other employees must be given particular weight).
- Administrative exemption. The employee's primary duty must be office or nonmanual work that is directly related to the management or general business operations of the employer or the employer's customers. The employee's primary duty also must include the exercise of discretion and independent judgment with respect to matters of significance.
- Professional exemption. The employee's primary duty must be work requiring advanced knowledge in a field of science or learning that is customarily acquired by prolonged, specialized, intellectual instruction and study.
The duties test will not change under the new rule.
During the Obama administration, the DOL raised the salary test substantially higher but that rule was held unconstitutional just days before it was scheduled to take effect in 2016. In addition to a lower salary threshold for exempt status, the new rule taking effect on January 1st does not include automatic adjustments to the threshold, unlike the 2016 version. The DOL, in a statement, said that going forward it would more regularly review the salary threshold than it had in the past.
While many employers reviewed the salaries and job duties of their workers in 2016 before the previous overtime rule amendment was declared unconstitutional, the issuance of this new rule provides another opportunity for employers to audit the FLSA status of their workforce. Job duties can change over time with new technology and methods of operation. Jobs that were previously exempt may not be so anymore and non-exempt jobs may have taken on new duties so that they now meet the exempt status test. A change in the law is not only an excellent time to review the status of workers, but any changes that need to be made should be explained to employees as resulting from the change in the law to avoid workers feeling that they are being demoted or were previously being paid wrongfully.
