By: Barry Dorans
The Fair Labor Standards Act (“FLSA”) requires that all non-exempt employees be paid time and a half for any overtime they work in a work week. To be exempt, an employee must meet certain task related criteria, such as being a manager, and be paid a salary. The minimum salary level for employees has been $455 per week ($23,660 per year) since 2004.
In 2016, the Department of Labor issued a new regulation raising the minimum wage to $913 per week (47,476 per year) effective December 1, 2016. That regulation also provided that the minimum salary level would increase every three years thereafter.
A Federal Court in Texas issued a temporary injunction on November 22, 2016, which prevented the Department of Labor from enforcing the regulation. By that time, of course, many employers had already made changes in the way they treated their employees to make sure they would not run afoul of the new regulation. While the Federal Court temporarily enjoined the Department of Labor from enforcing the regulation, that did not prevent employees from suing employers claiming employees were no longer exempt under the new regulation. At least one class action suit was brought against employers claiming that the new regulation was in effect.
Further, there was a fair amount of uncertainty since the District Court’s ruling was temporary before it fully considered all of the issues.
On August 31, 2017, the Texas Federal Court issued a final opinion holding that the regulation was invalid. While the Department of Labor appealed that ruling to the United States Court of Appeals, the Department of Justice has now requested that the appeal be stayed and indicated that it start the process to issue a new regulation on the minimum salary requirement for workers to be exempt from overtime. That means that the proposed minimum of $913 per week is not in effect.
Accordingly, the current minimum salary requirement for exempt employees remains at $455 per week ($23,660 per year) and remains in place until the Department of Labor issues a new regulation. Employers should remember that to be considered a salary, the amount paid must be at least $455 per week for each week in which an employee reports to work each day, even if the employee works less than 40 hours in that week. The employer is allowed to make certain reductions, but must be careful to make sure they are done properly. Further, paying a salary is not enough to make an employee exempt, their primary duties must fit within an exemption. Since employees’ duties vary from time to time, employers should carefully reexamine who is treated as exempt from time to time and should consult with counsel if there is any doubt, since a mistake can be costly.