The Fair Labor and Standards Act (“FLSA”) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards that affect employees in both public and private sectors jobs. As with most federal legislation, the FLSA contains many exceptions and exemptions. Recently, the U.S. Department of Labor proposed an exemption update to the FLSA, which will affect countless employers and millions of employees.
As it stands now, the FLSA sets forth two tests to determine whether an employee is “exempt” from the minimum wage and overtime provisions of the FLSA: the duties test and the salary level test. Certain employees performing executive, administrative, and professional (“white collar”) duties will qualify under the duties test. The proposed update does not affect that test, but of course, the analysis does not stop there. Those white collar employees still need to meet the minimum salary level test to be considered “exempt.”
The update proposed by the DOL would significantly increase the standard salary level required to classify certain employees as exempt. The current salary level for white collar employees is $23,660 per year. Employees earning a salary below this level are non-exempt employees. The proposal, however, would require those white collar employees making less than $47,000 per year to be reclassified as non-exempt, entitling them to overtime pay for all hours worked in excess of 40 hours per week.
The final rules may be published yet this month, with an effective date 60 days after publication.
Misclassification of employees (exempt v. non-exempt) is a serious concern both for employers and employees. Employers face civil money penalties, and in some cases criminal prosecution. Employees are deprived of earned pay and benefits. Misclassified employees may commence a private lawsuit for up to 3 years of back pay (2 years if the violation was not willful), liquidated damages (in an amount equal to the back pay owed), attorney fees and costs. The DOL has made clear that it will not tolerate non-compliance with the FLSA.
Attorney Andrea B. Niesen represents both employers and employees on wage and hour issues. If you have any questions about the proposed update to the FLSA, contact Bird, Stevens & Borgen, P.C.. You can also check out other employment law blog posts here.