The Final Rule for overtime pay issued by the DOL under the previous administration is still in a legal holding pattern. But the old rules still apply for now - for now.
In May 2016 the Department of Labor (DOL), under the Obama administration, had announced an extensive revision of the overtime rules under the FLSA. This included nearly doubling the minimum salary requirement for exempt employees from $23,660 to $47,476 per year.
Under the new rule, known as the Final Rule, those employees who earned less than $47,476 would no longer meet the overtime exemption under the FLSA. Consequently, they would be entitled to overtime compensation for any hours worked over 40 hours in a work week.
Although nothing is certain at this point, given that the implementation of the rule has been delayed by the Texas court's ruling, there is probably a greater likelihood that Congress and/or the new administration will take action to address the rule before it ultimately goes into effect.
According to an update alert at Lexicology back in November 2016,
Now that the Trump administration is in position, he could direct the DOL to drop the appeal. In addition, President Trump can take the position that his administration is not going to enforce the new rule and even take steps to revise or rescind it altogether.
Previously, several bills in Congress were introduced to block, delay or revise the proposed changes, but they failed to pass and would have faced certain veto under the Obama administration. Now that the Republicans control both houses of Congress, such bills may be reintroduced and, if passed, may fare better under a Trump administration.
Recent comments from officials within the new administration under President Trump have already hinted that they will certainly take action to block or rescind the new rules.
Exempt and Nonexempt: What Rules Apply
The federal Fair Labor Standards Act (FLSA) applies three tests, all of which generally must be satisfied for an employee to be exempt from the FLSA's minimum wage and overtime requirements: a salary basis test, a salary level test, and a duties test.
According to the Fair Labor Standards Act website, those employees whose jobs are included by the FLSA are either "exempt" or "nonexempt." All nonexempt employees are entitled to overtime pay, but exempt employees are not. Most employees covered by the FLSA are nonexempt.
The FSLA currently states that,
With few exceptions, to be exempt an employee must (a) be paid at least $23,600 per year ($455 per week), and (b) be paid on a salary basis, and also (c) perform exempt job duties. These requirements are outlined in the FLSA Regulations (promulgated by the U.S. Department of Labor). Most employees must meet all three "tests" to be exempt.
The website goes on to point out that employees who earn more than $100,000 per year are "almost certainly exempt."
In addition to the salary level requirements, there is the salary basis test. The FSLA states that the salary basis test applies only to reductions in monetary amounts. Employer actions such as requiring an employee to charge absences from work to leave accruals do not constitute a reduction in "pay," since the monetary amount of the employee's paycheck remains the same.
The rules describe salary level this way,
Generally, an employee is paid on a salary basis if s/he has a "guaranteed minimum" amount of money s/he can count on receiving for any work week in which s/he performs "any" work. This amount need not be the entire compensation received, but there must be some amount of pay the employee can count on receiving in any work week in which s/he performs any work.
Finally, there is the duties test. Simply put, an employee whose work is primarily supervisory is considered exempt. Job duties are exempt executive job duties if the employee:
- Regularly supervises two or more other employees, and also
- Has management as the primary duty of the position, and also,
- Has some genuine input into the job status of other employees (such as hiring, firing, promotions, or assignments).
Playing by the "Rules"
The challenge for most employers is whether to make changes in their current payroll policies - as a number of businesses already have - or to hold off and take a "wait and see" stance in regards to the fate of the Final Rule.
Thre are many other new regulations expanding the potential of risk for employers. Since these require new workplace postings, or mandate changes to existing workplace policies, we recommend that all employers consult with experienced employment counsel to ensure compliance.
Accurate and timely management and compliance practices are required for every business and every payroll professional. But there are options.
Accuchex, a reputable payroll management services provider, can not only relieve you of the burden of your ongoing payroll process demands, but can potentially prove to be a more cost-effective solution, as well.
Click this link o get your free download of our Payroll Outsourcing Guide. Or click the button below to learn what you need to know about labor law in California. For more information, feel free to call Accuchex Payroll Management Services at 877-422-2824.