The calendar (if not the weather) tells us that fall is almost here. With the change in seasons comes another reminder that the effective date of the U.S. Department of Labor’s new Fair Labor Standards Act “white-collar” overtime exemption regulations is fast approaching.
Effective December 1, new rules that more than double the minimum weekly salary requirement for the FLSA’s white-collar overtime exemptions to $913 will be the law of the land. If an employer cannot show that an employee meets the requirements of one of the exemption tests, that employee will be legally entitled to overtime, and the employer could face significant potential liability for unpaid overtime pay, liquidated damages, and attorneys’ fees.
Now is the time for Pennsylvania employers to consider the following action items:
- Identify those employees you currently treat as exempt from overtime pay and determine whether their salaries will meet the new threshold of $913 per week (i.e., $47,476 annually).
- For those employees currently treated as exempt who earn less than $913 per week, consider whether to increase their salaries to meet the new salary requirement or convert the employees to non-exempt status and pay them for overtime worked. This decision will require an in-depth cost/benefit analysis that considers the employee’s pay, the hours worked by the employee, the employer’s ability to record and control or manage the hours worked, and the relative strength of the employer’s position that the employee meets the duties test for one of the exemptions.
- Review all positions you treat as exempt, regardless of salary, and determine whether you could prove, if challenged, that the employee meets the duties test for one of the exemptions. For most of the FLSA’s white-collar exemptions, an employee can be treated as exempt only if the employee meets both the minimum salary requirement AND the duties test for the exemption. Simply paying a salary, even in excess of $913 per week, is not enough to exempt an employee from overtime pay.
- Confirm that you are properly tracking all hours worked and calculating the overtime rate for your non-exempt employees. Even though the new regulations do not change the pay rules applicable to non-exempt employees, they likely will increase the number of non-exempt employees you have, making compliance in this area even more critical.
December 1 will be here before we know it, and much work needs to be done by employers to prepare for the changes that take effect on that date. Are you ready?