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More employees may become eligible for overtime compensation under new rules proposed by the Department of Labor.  Under current rules, persons employed in bona fide administrative, executive or professional capacities are exempt from the overtime requirements of the Fair Labor Standards Act (“FLSA”).  In order to qualify as exempt, employees must satisfy the job duty requirements and must be paid on a salary basis.   An employee is considered to be paid on a salary basis if he or she receives a regular, predetermined amount of pay each pay period, regardless of the quality or quantity of work performed.

The administrative exemption applies to employees whose primary duty is the performance of office or non-manual work directly related to the management or business operation of the employer or the employer’s customers.  The executive exemption applies to employees whose primary duties are the management of the enterprise in which the employee is employed or a department or subdivision thereof.  To qualify under this exemption, employees must customarily direct the work of two or more individuals, have authority to hire and fire employees, or give opinions about which employees should be hired or fired that would be accorded particular weight.  The professional exemption applies to employees who perform work requiring knowledge of an advanced type in a field of science or learning that comes from a prolonged course of specialized intellectual instruction.

In addition to satisfying the duties requirements listed above, employees must also satisfy a salary level test.  To satisfy this test, employees must be paid a salary of at least $455 per week, which translates to a salary of $23,660 per year.  In other words, employees satisfying the duties requirements who are paid an annual salary of $23,660 or more are exempt from overtime compensation.

The Department of Labor’s proposal updates the minimum salary level requirement to be treated as exempt from $23,660 per year to $50,440 per year and automatically adjusts it over time.  If approved, this would only be the second increase since 1975.  The Department of Labor is also considering whether non-discretionary bonuses and incentive payments should count toward a portion of the salary level test for the administrative, executive and professional exemptions.  The proposed regulations, if adopted, are expected to take effect sometime in 2016.

Note that this post is only a brief summary of the new proposed overtime rules.  It does not constitute legal advice nor does it establish an attorney/client relationship.  Should you have specific questions regarding the above, please contact Gregory Sobkowski or Bonnie Coleman at Hodges and Davis.

Hodges and Davis, P.C. - November 2015