FLSA – Latest Update on Overtime Ruling
by Karin M. Smith, MBA, SFO, CFE, Consulting Partner
Posted on September 13, 2017
Over the past 24 months there has been much discussion on the possible changes to the methodology used to determine the “white collar” exemption related to the classification of an employee as exempt vs nonexempt under the Fair Labor Standards Act (FLSA). If these discussions slipped by you, here is a brief recap to catch up.
- In March, 2014, then President Obama issued a Presidential Memorandum to the US Department of Labor instructing the Wage and Hour Division to update the current salary level used in the 3-part test used to determine an employee’s exemption status. The salary level test has been set at $455 per week since 2004.
- In July, 2015, the Wage and Hour Division issued a notice of the proposed rule-making to increase the salary level test with the estimated threshold at almost $1,000 per week reaching an annual pay amount of $50,440. This notice provided an opportunity for employers and employees to comment on the potential advantages and challenges if this amount was to be used as the new salary amount test.
- In May 2016, the Wage and Hour Division published the final rule with an effective date of December 1, 2016. Beginning December 1, 2016, any employee who earns $913 per week or less ($47,476 per year) would not meet the salary level test and would be classified as non-exempt thus being eligible for the overtime and minimum wage provisions of FLSA.
- With the intended effective date being December 1, on November 22, 2016 a federal judge in Texas put the brakes on the published rule, in essence stalling the effective date of the new rule.
- For the next several months, there was much debate about the authority of the FLSA and Congress’ ability to in essence double the salary level test which in many cases would overrule the other exemption tests including pay basis and more importantly job duties test.
- Finally on August 31, 2017, US District Judge Amos Mazzant struck down the published rule and therefore rolling back the salary level test to the original $455 per week. This means, the existing salary level test of $455 per week/$23,660 per year is the salary level test that must be met in addition to the two additional tests.
The current Department of Labor administration has recognized the need to adjust the salary threshold; however it is anticipated that when the amount is adjusted to the extreme amount originally published. To stay up-to-date on the latest news on this issue, you can sign up for alerts from the Wage and Hour Division at https://www.dol.gov/whd/