By now most employees are at least familiar with the U. S. Department of Labor's (DOL) recently published final rulemaking changes to the so-called "white collar" overtime exemptions. This new rule makes several important changes to provisions of the Fair Labor Standards Act (FLSA). Basically, the final rule increases the minimum annual salary for exempt employees from $23,660 to $47,476 (or from $455/week to $913/week); it increases the minimum annual salary for exempt highly compensated employees from $100,000 to $134,004; and it automatically increases each of these thresholds every three years.
Q. Did the final rule go into effect as soon as it was published?
A. The answer is no. The final rule was published in May but the changes do not become effective until December 1, 2016. Although a bill was been introduced in an attempt to overturn the rule, it will likely not pass. So, short of a successful legal challenge to the new law, employers need to be reviewing their practices and making sure they take steps to comply before the effective date.
Q. Did the final rule change test for exempt employees?
A. The answer is no. The final rule did not change the duties test for any of the applicable exemptions. For any employees whose duties satisfy the exemption requirement, but are receiving less than the new minimum salary, employers will either be forced to increase their salary to meet the new minimum or reclassify them as non-exempt. In most cases, employees with the same job title who perform the same duties and responsibilities are required to be paid the same.
Q. Are employees required to satisfy both the duties and minimum salary requirement?
A. The answer is yes. Employees must satisfy both the duties requirement and the minimum salary requirement in order to receive the exempt classification. In other words, an employee who satisfies the duties test but is making less than the new minimum salary, will not be considered exempt. The same is true if an employee satisfies the salary requirement but not the duties test.
Q. What are the consequences for failing to comply with the new exemption requirements?
A. After December 1, 2016, any employer who has exempt employees who do not meet the new minimum standards will be at risk for being investigated by the DOL or being sued by an individual or as part of a class action. Given the wage and hour climate prevailing in the country these days, it is definitely not advisable for any employer to take that risk.
Q. Can employers be held liable for past unpaid overtime?
A. A common question employees have is whether an employer can be liable for past unpaid overtime when exempt employees are reclassified as non-exempt in order to comply with the new salary requirements. If an employer properly classified its employees as exempt in accordance with the old rules, and now seeks to reclassify them as non-exempt solely to avoid the increase in salary, then it is unlikely that the employer would be liable for unpaid overtime.
If you feel you have been denied proper compensation, or if you have any questions regarding your employment rights, please contact Wrady & Michel, LLC, either online or by calling us at (205) 265-1880.