Did you know that just prior to the COVID-19 lockdowns, a new set of rules were implemented that made significant changes to the Department of Labor policies regarding overtime? Effective January 1, 2020 a new overtime rule went into effect which set the minimum annual salary for exempt employees at $35,568 or $684 per week.
Although much lower than the $47,476 cutoff that was originally proposed by the Obama administration, and the $55,000 that it would have risen to once the inflation-matching provisions went into effect, this still represents a 50 percent increase over the prior salary requirement of $23,600 per year.
So what does this mean?
The Fair Labor Standards Act (FLSA) regulation 29 C.F.R. Part 541 requires that most employees in the United States be paid at least the federal minimum wage for all hours worked, and overtime pay at 1.5 times their regular rate for all hours worked above a 40 hour work week.
Under this rule change, approximately 1.3 million workers were estimated to have gained overtime pay. This change to the Fair Labor Standards Act essentially requires that an employee must earn above $35,568 per year or $684 per week in salary in order to not be given overtime pay for any hours they have worked above the nationally designated 40 hour work week.
What roles do, and do not, qualify for the EAP exemptions?
Section 13(a)(1)/(7) of the FLSA provides an exemption from both minimum wage and overtime pay requirements for employees classified as executives, administrators, professionals, and outside sales employees.
In order for an employee’s role to be exempt from the overtime rule, their specific job duties and salary must meet all the requirements of the Department’s regulations for their industry. This means they must now make more than $684 per week on a salary basis, and meet the following criteria per the Department of Labor:
Executive Exemption – Receiving an executive exemption requires that the role manages the enterprise, a recognized department or subdivision within the business. The person in this role must have at least two direct reports, and have an ability to either hire and fire or influence such.
Administrative Exemptions – Receiving an administrative employee exemption requires that the employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or their customers.
Professional Exemption – To receive a professional employee exemption, the employee’s primary duty must be the performance of work requiring advanced knowledge, intellectual in character, includes consistent exercise of discretion and judgment, as well as having attended extended courses for specializing in the science or learning-related field.
Computer Employees – To qualify for the computer employee exemption, the role must be employed as a computer systems analyst, software engineer, or other similarly skilled position. According to the FLSA, they must have primary duties consisting of applying “ systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications
Outside Sales – To qualify for the outside sales employee exemption, the outside sales role must have making sales, or obtaining orders or contracts for services, products or facilities be their primary duty. They must also be regularly engaged in activities for work away from their employer’s place of business.
Highly Compensated Employees – Highly compensated employees performing office or non-manual work and who are paid a total annual compensation of at least $107,432 are allowed to be exempted as long as they “customarily and regularly” perform at least one of the duties of an exempt executive, administrative, or professional employee.
It is important to note that the exemptions do not apply to police officers, fire fighters, paramedics, and other first responders. Additionally, blue-collar workers who perform work involving repetitive operations with their hands, physical skill and energy, or non-management employees in production, maintenance, construction, and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operation engineers, and laborers, for example, are entitled to minimum wage as well as overtime pay under FLSA regardless of how highly paid they may be.
What else does the rule impact?
In addition to increasing the minimum salary requirements for employers to say a person is exempt from overtime pay, it also accomplished the following:
- Increased the threshold for highly-compensated employees from $100,000 to $107,432. That means that…
- Allowed employers to count non-discretionary bonuses, incentives and commissions as up to 10% of an employee’s salary
- Removed the feature from the original policy update that had the minimum salary for exemption be linked to inflation. Thus, as inflation rises and it costs more to do the same activities or purchase the same goods, the salary cut-off stays the same.
The Liberty Trial Law Group believes that all employees should be aware of their rights in the workplace. If you suspect that your employer, or the employer of someone you know, is practicing unfair or discriminatory practices, give us a call at (816) 792-4400 or contact us through the Liberty Trial Law Group website so we can review the details of the case to ensure no one is being taken advantage of or discriminated against.