KingSpry Final Rule for Overtime Salary Standard

Department of Labor Issues Final Rule for New Salary Standard for Overtime Pay

Posted on May 19th, 2016
by Elizabeth M. Kelly

For more than two years, the United States Department of Labor (DOL) has been mulling over previously announced proposed changes to the federal regulation defining the amount of salary an employee must make in order for the employer to qualify for an exemption to the overtime pay rate mandated in the Fair Labor Standards Act (FLSA). 

The final rule was issued on May 18, 2016.

While many people are aware that employees who are paid on a salary basis, as opposed to an hourly basis, may be exempt from overtime pay requirements under FLSA, many people are not aware that there is a minimum salary level to meet the salary test.  The final rule raises the minimum salary requirement for exemption from $455 per week, the level it has stayed at for more than 10 years, to $913 per week, or $47,476 per year.

It is perhaps less widely known that there are conditions in addition to a minimum salary level that must also be met to qualify for the most commonly applicable exemptions to the overtime rule as well.  These conditions pertain to the type of job duties and responsibilities the employee performs.

The three most common exemptions are for employees whose work is executive, administrative or professional, and each of these terms are specifically defined in the FLSA regulations.

Who Is Affected?

Positions most likely to be affected are those held by white collar workers who earn less than $47, 476 annually, and who put in hours in excess of 40 per week, even if it is only on an occasional or seasonal basis, such as budget preparation and other busy times.   

Employees most likely to be affected are IT employees, accounting and payroll managers, supervisors or administrators who have not yet reached a salary level at or above $47, 476.

The consequence of this rule for employers is that it will require planning and analysis now, and budgeting for additional pay expenses, because in some cases, employers will need to determine whether they should (1) pay employees higher salaries, (2) pay employees overtime for excess hours or (3) restrict employees’ authority to work excess hours to get the necessary work done.

For government employers, there is another option:  compensatory or “comp” time in lieu of overtime.   This option continues to be available under FLSA only to government employers and is contingent on the agreement with the employee being made before the excess hours are worked.

There is also a limit on the amount of comp time that can be accrued at any one time (240 hours maximum at any one time) before it must be used by the employee or paid by the employer.

Other types of overtime exemptions, including the non-salary based overtime exemptions, such as those for teachers, also have not changed.

Bottom Line for Schools

The final rule is expected to be published on Monday, May 23, 2016, in the Federal Register, the official publication of federal regulations.  It will become effective on December 1, 2016.  Schools should be reviewing their employee complement to determine if they have employees who are now, or may soon become, non-exempt because of this rule change. The final rule will also provide for automatic updates to the salary level every three (3) years.

If you have any questions about the new rule, contact your legal counsel, or one of the attorneys at KingSpry.

 

School Law Bullets are a publication of KingSpry’s Education Law Practice Group. They are meant to be informational and do not constitute legal advice. John E. Freund, III, (jef@kingspry.com) is our editor.