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Estimated 4 Million More Employees to be Eligible for Overtime

By Charlie Voelker, Esq.

With the U.S. Department of Labor’s Wage & Hour Division’s recent release of its much-anticipated final ruling updating key regulations under the Fair Labor Standards Act (FLSA), it is estimated that more than four million employees will see their status change from exempt to non-exempt and become eligible for overtime in the first year the final rule is in effect.

The final rule is intended to modernize the regulations that exempt certain white-collar employees from the law’s minimum wage and overtime provisions. Generally, in order to qualify for an exemption, an employee must meet three tests:

  1. Salary Basis Test – the employee must be paid a fixed salary;
  2. Salary Level Test – the salary must meet a minimum amount; and
  3. Duties Test – the employee’s job duties must involve “executive, administrative, or professional” responsibilities as defined by the regulations.

 

The final rule, when it takes effect on December 1, 2016, will substantially change the Salary Level Test. Currently, in order to qualify for the exemption, an employee must be paid at least $455 per week. The minimum threshold will rise to $913 per week under the final rule. The final rule will also raise the total annual compensation requirement for “highly compensated employees” – another category of exemption – from $100,000 per year to $134,400 per year. Future updates to the minimum thresholds will occur every three years, beginning January 1, 2020.

Although the final rule does not take effect until December, many of our customers are already analyzing the impact of the new rule on their operations and pay practices. The main impact will be to ensure employees are familiar with their new timekeeping responsibilities, the prohibition of off-the-clock work, rules about overtime, and other aspects of the FLSA’s requirements.

Skillsoft’s Wage and Hour content, currently being updated to reflect the details of the final rule, offers an effective and efficient way to deliver this critical training to both hourly employees and their managers. Sample our Wage and Hour Awareness for Managers course here.

 

Charlie Voelker, Esq. is the Legal Compliance Solution Manager at Skillsoft.

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