On May 18, 2016, the Department of Labor (“DOL”) issued final rules relating to the Fair Labor Standards Act (“FLSA”) that updated the minimum salary amount that is required for an employee to be considered “exempt” under the FLSA. Under the final rules, which will go into effect on December 1, 2016, the DOL increased the minimum salary amount for employees performing certain duties to be considered exempt from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). The DOL also put into place a mechanism by which the minimum salary amount will be updated every three years.
The FLSA has always required that in order for an employee to be considered exempt and not subject to the minimum wage and overtime requirements of the FLSA, the employee has to meet three requirements. First, the employee has to be paid on a salary basis, which means that the employee’s pay is not reduced due to variation in the quality or quantity of work the employee performs. Second, the employee’s level of pay must be equal to or greater than a certain minimum level. Third, the primary job duties the employee performs must fit into one of the ‘exempt’ categories, which include performing executive, administrative, or professional duties.
The updated final rules make no significant changes to the first and third requirements, but do increase the minimum level of pay to $47,476 per year. This means that for an employee to be considered an exempt employee under the FLSA, the employee must perform certain duties and receive an annual salary of at least $47,476. Once an employee is categorized as exempt that employee can work over forty hours per week and not be entitled to overtime pay.
It is important to note that under the current FLSA regulations, teachers and academic administrative employees (such as counselors and curriculum directors) are not required to meet the minimum wage requirement. Therefore, these employees are exempt from the FLSA minimum wage/overtime requirements even if they earn less than the minimum salary amount.
In order to fully analyze the effect of these changes, employers should consider the number of employees directly affected by the increase and should weigh various options for addressing the salary requirements for these employees.
For more information, reference the DOL’s Fact Sheet relating to the change can be found here.
If you have questions regarding the change to the minimum salary amount or the Fair Labor Standards Act generally, please contact Emily K. Ellingson at Lynch Dallas, P.C. at firstname.lastname@example.org or 319-365-9101.