Employment / 1 min read
Unless specifically exempted from overtime, employees covered by the Fair Labor Standards Act (FLSA) must receive overtime pay for hours worked in excess of 40 in a workweek at a rate not less than time and one-half of their regular rates of pay. There are a lot of exemptions under the FLSA, but the three major categories of employees who are exempt from overtime are administrative, executive, and professional exemptions.
Whether employees are exempt under the above categories depends on the type of work they perform, known as the job duties tests, and whether they are paid a salary of at least $684 per week.
On January 1, 2020, The Department of Labor increased the minimum weekly salary from $455 to $684. The Department of Labor is looking to increase salary thresholds again; this time from $684 per week to $1,059 per week. Over three million people who are exempt under the current salary threshold would no longer be covered by the exemption.
There is no final rule yet – the Department of Labor invited comments by the public on the proposed rule; the comments period closed November 7, 2023. Unsurprisingly, businesses are opposed to the proposed rule. However, most observers expect a final rule sometime this year, perhaps as early as April 2024. If the salary thresholds are increased, the rule will be challenged in federal district courts. Rules and regulations are not statutes passed by congress and can be challenged if they are contrary to other statutes. In 2016, Texas challenged the previous salary threshold rule in federal court. Expect it to happen again. However, though the amount of the increase may be less than what the Department of Labor wants, salary thresholds will inevitably increase with time as increased costs of living and inflation are a reality for everyone.
We encourage our clients to evaluate and potentially adjust their practices. For example, employers should make a list of all exempt employees who are currently earning between $35,568 and $55,068 per year and determine whether their salary should be raised to meet the new prospective threshold or whether it makes economic sense to convert these individuals to non-exempt status. Non-exempt employees would have a right to overtime, but with accurate timekeeping and a policy that requires permission before an employee works overtime, it may be possible to control costs.