NEW LABOR REGULATION GOVERNING OVERTIME PAY REQUIREMENTS



The U.S. Department of Labor, effective December 1, 2016, has issued new regulations pertaining to overtime pay protections pursuant to the Fair Labor Standards Act (“FLSA”). Essentially the rule states that some management, administrative and professional employees shall become eligible for overtime pay when they work more than forty (40) hours per week.

Under the new rules, employers must pay overtime (time and half) for work performed by qualified employees working beyond forty (40) hours a week and earning up to $47,476 annually. In order to further understand the rule and its implications, it is important to understand what kind of employees specifically qualify and those who are exempt from the new overtime regulations. Employers must therefore conduct a thorough audit of their existing employees to closely examine those employees exempt from the overtime regulations.

Three criteria must be examined in order to determine whether a particular employee is exempt from overtime pay. The employer must also keep; in mind that all three criteria must be met with in order to qualify for the exemption:

  1. Employee must be paid on a salary/fee basis and not an hourly basis;
  2. The employee’s salary must meet or exceed the minimum salary requirement which is now $47,476 annually.

III. Employee’s primary job duty must involve the kind of work associated with exempt executive, administrative, or professional employees as follows:

  1. Professional Exemption: these include learned professionals, creative professionals, teachers, persons practicing law or medicine that primarily perform work that requires advanced knowledge in the field of science, or learning with a recognized educational degree. Specifically, the new minimum salary requirements do not apply to teachers, lawyers or doctors.

 

  1. Administrative Exemption: to qualify, the employee must receive a salary of at least or more than $47,476 annually and the employee’s primary duty of work must include office or non-manual work, usually related to business operations or management and must include the exercise of discretion and independent judgment.

 

  1. Executive Exemption: To qualify here, the employee must receive a salary of at least or more than $47,476 annually and have the primary duty of a manager, directing/managing the work of at least two other full time employees, including having the authority to hire, fire, promote, or having the right of influencing such decisions.

The final rules also establish a mechanism for automatically updating the salary and compensation level for “highly compensated employees” subject to a more minimal duties test, from its previous amount of $100,000 to $134,000.

The Computer Employee Exemption remains unchanged. To qualify for the computer employee exemption, the employee must be paid at least $913/week ($47,476/year) or at least $27.63/hour and the following duties must be satisfied:

  1. The employee must be employed as a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field; and
  2. The employee’s primary duty must consist of:
  • The application of system analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications;
  • The design, development, documentation, analysis, creation, testing, or modification of computer systems of programs, including prototypes, based on and related to user or system design specifications;
  • The design, documentation, testing, creation, or modification of computer programs related to machine operating systems; or
  • A combination of the aforementioned duties, the performance of which requires the same level of skills.

Considering employers have a limited time to comply with the new rules, it is advisable that they start ensuring compliance with the new rules well within the deadline. This would include thinking about whether  they want to provide pay raises, spreading employment by reducing work hours for employees working over 40 hours per week, or just paying the required overtime payment.

Leave a Reply