8.3.2016

On December 16, 2016, the changes to the Fair Labor Standards Act (FLSA) will go into effect that will modify the current test of exempt employee qualifications.

The FLSA has long-utilized a three part test to determine if an employee is exempt from receiving overtime as follows. 

  1. The employee must be paid a salary which does not vary;
  2. The salary has to equal or exceed a set minimum amount; and
  3. The employee’s duties must consist of executive, administrative or professional duties or the employee must work in a specialized area, such as computer professionals or commissioned sales employees.

The minimum salary threshold has not been adjusted in over ten years; it is only that part of the test that will change.  To be exempt from overtime, under the current salary test, an employee must earn at least $455 per week, or $23,660.00 per year.  Under the new salary test, to be exempt from overtime, an employee has to be paid at least $913 per week or $47,476.00 per year.

Another change to the minimum salary threshold gives employers more flexibility in meeting the requirement.  The FLSA will now allow an employer to pay up to ten percent of the required $913 per week through non-discretionary bonuses and commissions.  If an employer chooses to meet the salary test in this way, the employer must pay these mandatory amounts at least once per quarter.

Moreover, the  minimum salary threshold  will be updated every three years.  The first update will occur in 2020.

Additionally, highly compensated employees, who do not meet all of the elements of the third prong of the overtime exemption test[1], may still exempt from overtime if they earn at least $100,000.00 per year under the current test.  As of December 1, 2016, to be classified as a “highly compensated employee” an employee will have to earn at least $134,004.00 per year.

In summary, to be exempt from overtime, the amount that must be paid to an employee, meeting the three part test, is going from $455 per week/$23,660.00 per year to $913 per week/$47,476.00 per year and the amount a highly compensated employee must earn is going from $100,000.00 per year to $134,004.00 per year.

[1] FLSA regulations note that because a high level of pay is a "strong indicator" of exempt status, it eliminates the need for a "detailed analysis" of job duties. Thus, the regulations state, an employee earning a salary of $100,000 or more a year will qualify for exemption if the worker’s primary duty is performing office/non-manual labor and the worker "customarily and regularly performs any one or more of the exempt duties" of an executive, administrative or professional employee.

BLOG DISCLAIMER

The postings on this blog were created for general informational purposes only and do not constitute legal advice or a solicitation to provide legal services.  Although we attempt to ensure that the postings are complete, accurate, and up to date, we assume no responsibility for their completeness, accuracy, or timeliness.  The information in this blog is not intended to create, and receipt of it does not constitute, a lawyer-client relationship.  Readers should not act upon this information without seeking professional legal counsel.

This blog may contain links to independent third party websites and services, including social media. We provide these links for your convenience, and you access them at your own risk.  We have no control over and do not monitor the content or policies (including privacy policies) of these third-party websites and have no responsibility for, and no liability with respect to, their content, accuracy, or reliability.  Unless expressly stated, we do not endorse any of the linked websites or any product, service, or publication referenced herein or therein.  We will remove a link to any site from this blog upon request of the linked entity.

We grant permission to readers to link to this blog so long as this blog is not misrepresented. This site is not sponsored or associated with any other site unless so identified.

If you wish for Wilentz, Goldman & Spitzer, P.A., to consider representing you, please obtain contact information from the Contact Us area of this blog or go to the firm’s website at www.wilentz.com.  One of our lawyers will be happy to discuss the possibility of representation with you. However, the authors of Wilentz blogs are licensed only in New Jersey and/or New York and do not wish to represent anyone who viewed this site in a state where the site fails to comply with all laws and ethical rules of that state.

PRIVACY POLICY