On November 22, 2016, a federal district court judge in Texas halted temporarily implementation of proposed changes to federal wage and hour laws (set to take effect December 1, 2016). As discussed below, the changes would have increased the minimum salary for three categories of employees (professional, administrative & executive) exempt under federal law from the right to receive overtime compensation.
The Court did NOT decide whether the proposed changes ultimately will go forward. Notwithstanding, most commentators believe that our newly elected political leaders will take legislative action to reverse these proposed changes if the Texas Judge allows them ultimately to go forward.
Although proposed changes to federal law are “on hold,” employers in New York must comply with an increase in the State’s minimum wage. For information about those changes, check out http://modicalawfirm.com/new-york-minimum-wages-increases-what-you-need-to-know/
Finally, employers in New York must comply with an increase in the minimum salary for two categories of employees (administrative & executive) exempt under state law from the right to receive overtime compensation. For information about these changes, check out http://modicalawfirm.com/new-york-minimum-salary-increases-what-you-need-to-know/
Changes to federal wage and hour laws—known as the Fair Labor Standards Act [“FLSA”]—were scheduled to take effect on 12/01/2016. To appreciate the changes, you need some background.
The FLSA requires that covered employers (those with annual revenues of $500K or more) pay employees at least the minimum wage ($9.00 in New York for most workers) for each hour of work they perform. Non-exempt employees who work more than 40 hours in a given week must be paid overtime, that is, 1-1/2 times their regular hourly rate for each hour worked over 40.
Some employees are exempt from the right to receive overtime pay. To be exempt, the following three must be true:
FIRST, THE EMPLOYEE MUST BE PAID A WEEKLY SALARY OF A SPECIFIED AMOUNT.
Before 12/01/2016, that amount was $675.00 (which equates to $35,100/year). Effective 12/01/2016, that amount will increase to $913.00 (which equates to $47,476/year). If the employee’s salary is less than the amount specified, they are non-exempt (and entitled to overtime pay) as a matter of law. THIS IS THE PRIMARY PROPOSED CHANGE MADE TO THE FLSA.
Before 12/01/2016, an employee paid an annual salary of $100K or more is exempt as a matter of federal law. Effective 12/01/2016, that amount will increase to $134,004 or more.
SECOND, THERE MUST BE NO UNLAWFUL DEDUCTIONS FROM THE SALARY PAID.
In simple terms, absent five recognized circumstances, you cannot make any deductions from the salary paid. The regulations contemplate five circumstances under which you MAY deduct from salary: (1) absenteeism; (2) certain sick leave/Family & Medical Leave Act protected leave; (3) penalties imposed in good faith for infractions of safety rules; (4) unpaid disciplinary suspensions; and (5) certain mistaken overpayments.
FINALLY, THE DUTIES PERFORMED BY THE EMPLOYEE MUST MEET ONE OF SEVERAL TESTS IN THE FLSA.
The most common “white collar” exemptions are:
Administrative Exemption: This exemption applies if (1) the employee’s primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and (2) the employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.
Executive Exemption: This exemption applies if (1) the employee’s primary duty is managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise; (2) the employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and (3) the employee must have the authority to hire or fire other employees, etc.
Professional Exemption: This exemption applies if (1) the employee’s primary duty is the performance of work requiring advanced knowledge; (2) the advanced knowledge must be in a field of science or learning (such as law, medicine, accounting, engineering, etc.); and (3) the advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.
Here are some helpful questions and answers as prepared by Eric B. Meyer, Esq., author of The Employer Handbook Blog (found at http://www.theemployerhandbook.com/)
Q. How was the new salary level determined?
A. The 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South.
Q. Can we include bonuses towards the new salary of $913/week?
A. Some. Employers may use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.
Q. Will the salary level eventually change?
A. It will update automatically every three years.
Q. I heard rumors that the duties test would change too, has it?
A. No. “Primary duty” will continue to mean the principal, main, major or most important duty that the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.
Q. When will these changes take effect?
A. You have until December 1, 2016 to prepare.
Finally, here are helpful resources for those who want to learn more:
Overview from the US Department of Labor: www.dol.gov/sites/default/files/overtime-overview.pdf
Questions & Answers: www.dol.gov/WHD/overtime/final2016/faq.htm
General Guidance for Private Employers: www.dol.gov/whd/overtime/final2016/general-guidance.pdf
General Guidance for Small Businesses: www.dol.gov/WHD/overtime/final2016/SmallBusinessGuide.pdf
Please contact us if we can help.