Last May, the Department of Labor issued a Final Rule which made significant changes to the Fair Labor Standards Act, including changes which would result in overtime pay for many employees who were not previously eligible for overtime pay. The changes were supposed to go into effect December 1, 2016. The Department of Labor gave employers about six months to assess how they would comply. The main challenge to employers was the near doubling of the salary threshold from $23,660 to $47,476. In other words, employees who were not eligible for overtime because they earned a salary greater than $23,660 would be eligible as long as they earned a salary less than $47,476.
This caused many questions for HR because a lot more of the workforce would potentially be eligible for overtime pay. Employers had the option of paying out the overtime to eligible employees or increasing their salary above the threshold. Some employers made the adjustments before the deadline. Now they’re sitting in limbo.
If you’re assuming your company has it all figured out, you might be surprised. The Rule was set to be enforced starting on December 1, but a temporary injunction has changed that for the time being.A Federal Court has temporarily put the Final Rule on hold. As a result, there is no change at this time to the overtime provisions of the FLSA. Your employer can continue operating under the existing overtime law for now.
The Final Rule would change the salary test but did not change the duties test. So, the regardless of the outcome in the Court relative to the Final Rule, the following duties tests apply and are unchanged.
5 Exemptions to FLSA
Some Employees Are not Eligible for Overtime Pay Based on the Duties Performed by that Employee
While there are/were big changes afoot to the salary thresholds, there were no changes under the Final Rule for what is known as the Duties Test. In order for an employee to be eligible for overtime an employee must meet salary thresholds and must be employed in a position that made them eligible. There are many exemptions that make employees ineligible to receive overtime. Some of these may surprise you.
Here are the most common exemptions:
- Executives are not eligible regardless of salary. To qualify for executive status you must manage at least two full-time employees or their equivalents. Management is also not eligible. Management is denoted by the two employee designation as well as “particular weight,” which means you’re part of the decision-making process for the organization and your opinions carry some weight in regards to hiring and firing. Business owners are also ineligible. Business owners have at least a 20% investment in the business.
- Administrative positions are not eligible for overtime . You are considered an administrative role if the duties you perform are “directly related to management or business operations.”
- Learned professionals are exempt. These include employees whose work requires “advanced knowledge and training.” Many employees in scientific, academic and legal fields are covered under this exemption, including teachers. Creative professionals whose main pursuit is artistic are also not eligible.
- Computer-related professionals are exempt, provided they meet a separate salary test..
- Outside sales representatives are exempt. However — and here’s a part many employers get confused over — inside sales representatives are eligible for overtime.
If, after reading about these exemptions, you believe your employer has incorrectly categorized you as exempt don’t wait on the injunction to be lifted. Even if it is lifted tomorrow, it does not change the Duties Rule, only the salary thresholds. Contact our tenacious employment attorneys to help understand the intricacies of the Duties Test. At Wenzel Fenton Cabassa, P.A., your initial consultation is free.