Current Landscape for Defining Exempt Employee Under FLSA
This time last year, employers subject to the Fair Labor Standards Act were conducting in-depth analyses of the exempt versus non-exempt classifications of their employees. Specifically, businesses considered whether exempt employees met the duties test for an executive, administrative professional, outside sales and computer employees as well as whether they met the Department of Labor’s salary level test that was to go into effect on December 1, 2016. That salary level test, which revised the Fair Labor Standards Act overtime rule, contemplated an initial increase in the salary threshold from $455 to $913 per week, with future automatic increases every three years. On the eve of the effective date of that revised rule, also referred to as the Final Rule, the United States District Court of Eastern District of Texas issued an injunction that prohibited the Department of Labor from implementing and enforcing the Final Rule. That injunction remains in place as of this date.
In the meantime, the Department of Labor has stated that it intends to revise the Final Rule and the current Department of Labor Secretary, Alexander Acosta, has gone on record as supporting an increase in the salary threshold to $33,000 per year or $635 per week. On July 26, 2017, the Department of Labor published a request for information where it is asking the public for comments on questions relating to the Final Rule and in particular, the salary level test, the duties, test, the inclusion of non-discretionary bonuses and incentive payment to satisfy the salary test, and the automatic increases to the salary level test. The public has until September 25, 2017 to provide its comments to the Department of Labor.
While this issue remains unsettled, employers should expect that a new salary level test, at an amount higher than the current minimum but lower than the Final Rule, will ultimately be proposed by the Department of Labor in the near future. Any increase in the current salary level test will result in additional employees becoming automatically entitled to overtime for actual hours worked over 40.
As employers await direction on this pending salary threshold issue, it is recommended that routine audits of employee classifications be conducted in order to ensure each employee designated as exempt does, in fact, meet the duties test. For example, the term “manager” in a job title does not automatically deem an employee exempt from overtime. Rather, it is the primary job duties and work performed by that employee that dictates the exempt or non-exempt classification of an employee. Proper classification is critical in order to avoid the harsh consequences of employee misclassification, which includes liability for back overtime wage, liquidated damages, and potentially an employee’s reasonable attorney’s fees.
Attorney Loren Speziale serves as Chair of Gross McGinley’s Employment Group, counseling employers in matters related to FLSA and ADA requirements, employee handbooks and policies, agreements and contracts, wage and hour issues, discrimination complaints and investigations, and more.