December 2016 Bar Bulletin
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December 2016 Bar Bulletin

Ten Tips for Navigating the New FLSA Overtime Rules

By Celeste M. Monroe

 

The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and child labor standards that affect full-time and part-time workers in the private sector and in federal, state and local governments. Under the FLSA, all covered employees must earn at least $7.25 an hour.

However, employers with employees in Washington must comply with the Washington Minimum Wage Act (MWA) and any minimum wage law imposed by local governments. The minimum wage in Washington is currently $9.47 an hour.1 Under both the FLSA and MWA, employees are entitled to overtime pay of one and one-half times their regular hourly rate for all hours worked over 40 in a workweek.

These minimum wage and overtime provisions apply generally to all “employees” unless the employees can be classified as “exempt” from the provisions. An exempt employee has virtually no rights under the FLSA overtime rules other than to the full amount of the individual’s base salary in any work period during which s/he performs any work (less any permissible deductions). Nothing in the FLSA prohibits an employer from requiring exempt employees to “punch a clock,” work a particular schedule or “make up” time lost due to absences. Further, the FLSA does not limit the amount of work time an employer may require or expect from an exempt employee.

Since 1940, the Department of Labor (DOL) regulations have generally required each of three tests to be met to qualify for an exemption:

(1) Salary Basis Test: Employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality and quantity of work performed.

(2) Salary Level Test: The amount of salary paid must meet a specified minimum amount.

(3) Job Duties Test: The employee’s job duties must meet the duties defined in the regulations.

For the past 12 years, the minimum salary level has been $455 a week (or $23,660 annually), exclusive of board, lodging or other facilities. However, effective December 1, the weekly salary level increased to $913 a week (or $47,476 annually), exclusive of board, lodging or other facilities. This change has prompted employers to carefully examine employee classifications and has initiated important discussions about how to prepare for the increase.

Here are 10 things employers and their counsel should keep in mind as they navigate the new rules.

1. An employee who does not meet the job duties test does not qualify as exempt regardless of how much they earn. An employee may earn well over $913 a week, but if s/he does not perform exempt duties, as defined by law, s/he must be reclassified as non-exempt and will be eligible for overtime pay.

The FLSA provides exemptions for “any employee employed in a bona fide executive, administrative, or professional capacity (including any employee employed in the capacity of academic administrative personnel or a teacher in elementary or secondary schools), or in the capacity of an outside salesman….” It also exempts certain computer systems analysts and programmers. Congress has not defined these terms.

However, the DOL, which enforces the FLSA, has implemented regulations to clarify how employers can determine which employees fit into these exemptions by virtue of their required job duties. The Washington Department of Labor and Industries has implemented similar regulations to clarify the MWA.

Meeting the job duties test is harder than one might think as the exemptions are intended to be limited to employees who perform relatively high-level work. Whether the duties of a particular job qualify as exempt depends on what they are and should be reviewed thoroughly for compliance.

2. The weekly salary minimum is not adjusted for part-time employees. Even if you have a part-time employee who meets the job duties test, s/he must be paid the minimum salary level of $913 a week to qualify for exemption. If an employee does not meet the minimum, s/he must be reclassified as non-exempt and is eligible for overtime pay.

3. Salary levels for some exempt positions are not affected by the new rule. Although the recent amendments increased the minimum salary level for most administrative, professional and executive employees, it did not affect the pay provisions for certain licensed professionals (e.g., lawyers or doctors), outside salespeople or certain retail employees. The hourly salary for the Computer Professional Exemption is still $27.63.


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