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Significant FLSA Changes Looming

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Under the Fair Labor Standards Act (“FLSA”), employees are entitled to minimum wage and overtime (i.e. time and one-half of the employee's regular rate of pay) for all hours worked over 40 in any given work week). However, certain categories of employees are considered “exempt” from the FLSA's minimum wage and overtime provisions. In this regard, employees that meet the definition of executive, professional, administrative, outside sales and computer employees are exempted from the FLSA's minimum wage and overtime requirement.

In order to qualify as exempt under any of these categories, employees must perform certain duties defined in Department of Labor regulations and must be compensated on a salary basis at a rate of not less than $455 per week ($23,660 per year). Employees who are not paid on a salary basis at the required rate are not considered exempt and must be paid overtime (and minimum wage).

Effective December 1, 2016, the minimum weekly salary required to maintain the exemption under the FLSA increases from $455 per week to $913 per week (or $47,476 per year) — more than doubling the current minimum. The Department of Labor will permit employers to satisfy up to 10 percent of the new standard salary requirement with nondiscretionary bonuses, incentive payments, and commissions, provided these forms of compensation are paid at least quarterly. This regulation, 29 CFR Part 541, can be found here.

Undoubtedly, unless employers are willing to dramatically increase the pay of exempt workers in order to avoid losing the exemption, this change will dramatically increase the number of employees eligible for overtime compensation.