Posted on January 6, 2017 by Lasher Holzapfel Sperry & Ebberson
The Fair Labor Standards Act, commonly referred to as the FLSA, is a federal statute that establishes baseline obligations of employers with respect to minimum wages, overtime pay, record keeping and youth employment, in the United States. Most states and local governments, including Washington and Seattle, have created their own laws that supplement and overlap with the minimum requirements of the FLSA. Employers need to be cognizant of, and comply with, all laws (federal, state, and local) or risk liability to their employees for overtime and wages.
On May 18, 2016, the U.S. Department of Labor announced new rules governing when a salaried employee is considered exempt from the overtime provisions of the FLSA. The new rules primarily relate to those employees that are exempt from overtime on the basis of the executive, administrative and professional nature of their work. These are the traditional white collar salaried employees that many employers rely on to work in excess of 40 hours each week.
The FLSA sets forth a basic three part test to determine whether an employee is exempt from overtime provisions of the FLSA. These three parts are:
1. The employee must paid on a predetermined salary that is fixed, and not subject to reduction based on variations in quality or quantity of work;
2. The employee must be paid a certain minimum salary; and
3. The employee’s job responsibilities must meet the “duties test” for executive, administrative, professional outside sales or computer employees.
The most recent change in the law relates to the second factor in the above test. Specifically, the law raises the minimum salary required before classifying an employee as exempt from overtime from $455 per week to $913 per week. On a per annum basis, this increases the minimum salary from to $23,660 to $47,476 per year. In addition, the rule increases the minimum salary level for “Highly Compensated Employees” (“HCE”) nearly $35,000 from $100,000 to $134,004 per year (an HCE’s duties test is less rigorous than for other exemptions). Finally, the new regulations include a mechanism for automatically raising the minimum salary level every three years (before this rule change the salary minimums had not changed since 2004).
According to the Department of Labor and the White House, the changes in the law will impact 4,230,000 employees nationwide, including 75,574 employees in the State of Washington. For Washington employers, this means that even though certain employees may have had no change in their salary, duties, or work/life balance, those employers are no longer “exempt” under the FLSA, and are entitled to overtime for all hours worked over 40 hours in a week. The FLSA allows employees to collect double the amount of overtime owed to them, as well as their attorneys’ fees and costs. These amounts can add up quickly, and exposure for unpaid overtime can have significant financial repercussions on a business.
It should be part of any employer’s best practices to consistently review how it is compensating its employees to ensure compliance with all federal, state, and local laws The employment lawyers at Lasher, Holzapfel Sperry & Ebberson can help you determine whether your payment practices may be exposing your company to potential liability.