Employment Law Bulletin: Department of Labor Final Rule Providing Millions of White Collar Workers Eligibility for Overtime Pay Goes Into Effect December 1, 2016

by Russell Landy, Partner, Damian & Valori LLP

Earlier this year, the United States Department of Labor (“DOL”) announced a final rule change extending overtime protections to over 4 million white collar workers by more than doubling the salary threshold for an employee to qualify for an exemption from minimum wage and overtime pay from $23,660 to $47,476 annually (or $913 per week).

The rule change becomes effective December 1, 2016. Employers who have not already done so should begin reviewing their employees’ job functions, rates of pay and hours worked now to determine how the new rules will affect their payroll obligations to their employees.

The Fair Labor Standards Act (“FLSA”) generally requires covered employers to pay their employees at least the federal minimum wage (currently $7.25 an hour and $8.05 under Florida law) for all hours worked, and overtime premium pay of one and one-half times the employee’s regular rate of pay for all hours worked over 40 in a workweek. There are, however, several exemptions from the FLSA’s minimum wage and overtime requirements, including an exemption from both minimum wage and overtime protection for “any employee employed in a bona fide executive, administrative, or professional capacity … or in the capacity of outside salesman ….”

Historically, the regulations implementing the white collar exemption have generally required each of three tests to be met for the exemption to apply: (1) the employee must be paid a predetermined and fixed salary; (2) the amount of salary paid must meet a minimum specified amount; and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by federal regulations.

The DOL estimates that 4.2 million previously exempt workers who earned at least $455 per week but less than $913 per week will become entitled to minimum wage and overtime protection under the FLSA. And, based upon this change, employers will have the obligation to track the hours worked of the newly non-exempt employees – among other previously unnecessary record keeping requirements.

The rule also provides for future automatic updates to the compensation thresholds every three years, beginning on January 1, 2020.
In short, without making changes, employers of an estimated 4.2 million Americans could be subject to lawsuits seeking to recover minimum wage and overtime pay, liquidated damages, and attorneys’ fees and costs should the employers not adapt to the new exemption rules.

About The Author: Russell Landy is a Partner at the law firm Damian & Valori LLP, and focuses his practice in the areas of Complex Business Litigation, Labor and Employment Litigation, Business Torts, Real Estate and Community Association Litigation, and Contract Litigation. Contact us for more information.