Legal Corner: The New Normal of Minimum Wage and Overtime Rules

It’s time to get your head of the sand and start preparing for changes in the minimum wage and overtime rules administered by the Department of Labor (DOL) under the Fair Labor Standards Act (FLSA). The FLSA dictates when an employee must be paid at least a federally-mandated minimum wage and when an employee who works more than 40 hours in a week is eligible for overtime pay.  The basic requirement is that any employee is must be paid minimum wage and overtime unless he or she is considered “exempt” under the FLSA. An “exempt” employee is one who meets three tests:

  1. A “duties” test, under which the employee is primarily performing executive, administrative, or professional duties as provided in the DoL’s regulations.
  2. A “salary basis” test, under which the employee  is paid a predetermined and fixed salary which is not hourly in nature and which is not subject to reduction because of variations in the quality or quantity of work performed.
  3. A “salary level” test, under which the employee is paid more than a governmentally-specified weekly or annual threshold amount.

The first two tests are not affected at all.  But the  3rd test – the “salary level” test — will see some major changes effective December 1, 2016There are actually three changes coming:

  1. There is a new minimum threshold under the salary level test of $ 913 per week or $ 47,476  per year (which is almost double the prior amounts of $ 455 per week and $ 23,600 per year, but slightly lower than the originally proposed $ 970 per week or $ 50,440 per year)
  2. The rates will automatically be readjusted every three years according to a formula set in the new rules.
  3. There are new rules regarding the treatment of certain bonuses, incentive payments and commissions.

Despite the fact that these were first proposed almost a year ago, were discussed at last year’s “Legal Hotline Live” session in Salt Lake City, and were the subject of a post I wrote for my firm’s blog (which was linked to via another post I wrote for the AAN website), it seems as though many people were still hoping these rules would not go into effect.

I can’t really blame you for this, as its estimated that the new rules will shift approximately 4.1 million workers nationwide from “exempt” to “nonexempt” and likely result in about 100,000 others enjoying a pay increase to bring them above the $ 913 per week/$47,476 per year threshold. As I noted in my earlier post on the AAN website, one member estimated that 90% of all reporters at AAN member publications make between $ 23,600 per year (the old threshold) and $ 47,476  per year (the new threshold). Most, if not all, of them already meet the duties and salary basis tests and, therefore, are now eligible for overtime pay if they work more than 40 hours in a given week.

So, like it or not, it is time to face the reality of these new rules.  Yes, there still could be a last minute reprieve in the form of a legislative attempt to overturn the new rules. But I wouldn’t count on that – I certainly wouldn’t count on members of the House and Senate mustering enough votes to override a likely Presidential veto of such legislation.

I’ve written another blog post for my firm’s Commlawblog which summarizes the rule changes and identifies some things you can do to get started in terms of complying with these new rules, including determining whether your company is even covered by the FLSA (most, but not all, of you are), whether you might be eligible for the “small newspaper exemption” (most, but not all, of you are not), and considerations for how to treat specific employees (including but not limited to increasing the pay of those employees already near the new threshold, hiring new full time or part time employees to ensure no one works more than 40 hours per week, instituting new procedures for both supervisors and employees to ensure nobody works overtime or creating a plan to ensure that overtime is not abused).

I’ll be summarizing these rule changes as well during my Legal Hotline Live session in Austin, which is slated to run from 3:20-4:05 on Friday, July 8. But, like I’ll tell you then, employment law is not my specialty, so you are well-advised to actually hire someone with more knowledge than I have in that area to help you implement your response to these changes.

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