Earlier this year, the Department of Labor updated the Fair Labor Standards Act (“FLSA”), making changes that will have a significant impact on white collar employees and employers. The FLSA requires employers to provide a minimum wage and overtime pay to their employees. However, the FLSA allows employers to not give overtime pay to certain employees, including “executive, administrative, and professional employees” (“EAP”) and “highly compensated employees” (“HCE”).
On May 18, 2016, the Department of Labor updated the definitions of these two classes of employees for the first time since 2004. In order to qualify as an EAP, an employee must receive a fixed salary above a certain amount and must perform executive, administrative, or professional duties. To qualify as an HCE, an employee must receive an even higher income, but is not required to perform the same level of executive duties. The update to the FLSA changed the salary requirements for employees to qualify as EAPs or HCEs.
The Department of Labor made three major changes. First, it increased the minimum salary requirement for EAPs from $23,660 per year to $47,476 per year. Second, it increased the minimum salary requirement for HCEs from $100,000 per year to $134,004 per year. Finally, it stated that the minimum salary level will automatically update every three years to a 40th percentile of salaried workers minimum for EAPs and a 90th percentile minimum for HCEs.
These changes will have significant implications for both employees and employers. For employees, some workers may be eligible for overtime pay who were not previously eligible. Employers, on the other hand, will need to reevaluate which of their employees are entitled to receive overtime pay. Employers will need to decide whether to begin paying these workers overtime or whether to increase their wages so that they are again over the minimum salary requirement. Overall, these changes will likely mean higher wages for employees and re-evaluations for employers.
To learn more about the updates to the FLSA, you can read the Department of Labor Fact Sheet here: https://www.dol.gov/WHD/overtime/final2016/overtime-factsheet.htm.
If you have any questions on how these changes affect you, either as an employee or an employer, contact White Law PLLC!