More pay for more work. It's a simple premise that may have been taken for granted at some point, but in the past couple decades has been somewhat eroded by past administrations' failure to update the overtime rules under the Fair Labor Standards Act (FLSA). Under FLSA, employers can deem some salaried workers exempt from overtime if they fulfill certain duties and are paid at least a certain amount. Up until now, that amount has been $455/week, roughly $23,000.00 a year, not a living wage in many American cities. However, the rule has changed, and as of December 1, 2016, employers must pay their salaried workers $913/week to lawfully exempt them from overtime (The overtime rate of pay is 1.5 times their regular rate of pay for each hour worked over 40 in a week).
According to the Department of Labor's May 18, 2016 press release, key provisions of the final rule include:
The Final Rule focuses primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt. Specifically, the Final Rule:
- Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South ($913 per week; $47,476 annually for a full-year worker);
- Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and
- Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
Additionally, the Final Rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.
That last bit is a bit of a concession to employers, as is the six month period they have to adjust to the new rule by either a) paying their workers overtime or b) hiring more workers so overtime is no longer required.
This new rule-making is a welcome and long-awaited update to rules that had created a systematic exploitation of low-wage employees. For instance, companies would frequently call a retail employee a "manager" (despite them maybe not having the requisite authority with respect to business affairs) pay them the minimum necessary salary, and work them 60 hours a week without overtime. Those days end on December 1st.
The attorneys at Edelstein Payne & Lucas have years of experience litigating FLSA overtime cases as well as lawsuits to enforce North Carolina's state Wage & Hour Act. If you believe you have been wrongfully denied overtime, initiate a consultation inquiry with us by filling out our contact form on our employment law page or call us at 919-828-1456.