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More Employees to Receive Overtime under changes to the Fair Labor Standards Act

Update: Changes to Regulations Stopped by Court in Texas

On May 18, 2016, the Department of Labor published final rule changing overtime exemptions under the Fair Labor Standards Act (FLSA). The new regulations change only the salaries tests for exemption and will be in effect on December 1, 2016.

The key changes are:

  • an increase of the minimum salary level for exempt employees from $23,660 or $455/week to $47,476 or $913/week
  • an increase from $100,000 to $134,004 for highly compensated employees (HCE)
  • an automatic update of the minimum salary level to the 40th percentile of full-time salaried workers in the lowest-wage region and the HCE level to the 90th percentile of all full-time salaried workers every three years

With these significant changes, employers may need to reclassify employees. Both the duties and the new salaries tests must meet the exemption requirements in order for an employee to be classified as exempt. In addition, employers cannot pro-rate the salary of a part-time employee to comply with the new regulations. Non-profit organizations also must comply with FLSA’s changes if over $500,000 is received in annual sales from business activities, not charitable activities or donations. Small businesses must also follow the new rules if sales total over $500,000 a year. All businesses automatically covered by the FLSA (federal, state, and local governments; hospitals; residential care facilities for seniors or people with disabilities; schools for the gifted or children with disabilities; and preschools, elementary and secondary schools, and higher learning institutions) must also comply. Furthermore, individual coverage is applied by the FLSA to employees regularly involved in interstate commerce or the making of goods for such commerce. After December 1, 2016 when the new regulations come into effect, employers may become subject to investigation by the Department of Labor and private litigation including class action litigation.

Please call us at (518)489-5600 to speak to an attorney or request further information. Smithhoke is available to assist you.

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