Important Changes to Pay Provisions Under the Fair Labor Standards Act Put on Hold
January 3, 2017
On December 1, 2016, changes to certain overtime pay regulations under The Fair Labor Standards Act (“FLSA”) were to go into effect. Based on a federal judge’s ruling, those changes have been put on hold for the time being, as the judge ruled that the Department of Labor exceeded its authority in enacting the proposed changes.
Under the FLSA, most employees are to be paid (i) at least minimum wage and (ii) for hours over 40 worked in a single workweek, overtime pay of time plus one-half their regular rate of pay. These employees are considered “non-exempt” and their hours at work are to be tracked and paid accordingly. Certain employees may fall under an exemption to the hourly pay provisions and be paid on a salary basis if they meet the criteria for exemption such as, for example, those related to administrative or executive job duties. Note that other exemptions to the overtime pay regulations exist, but administrative and executive exemptions tend to be the ones most applicable in the construction industry.
Under the proposed new regulations, the first step and most distinctive change in the law determining whether an employee would be considered exempt – the salary level – was to increase from $455 per week to $913 per week. That means that if an employee is to be paid less than that threshold, they must be paid hourly (and receive overtime pay if they work more than 40 hours in a workweek). If the salary test is met, however, all other criteria in determining qualification for an exemption must also be met. Those criteria include (i) payment of an employee’s full salary without reduction associated with the quantity or quality of work and (ii) meeting all job duties set forth in the law associated with the exemption.
At this juncture, we do not yet know whether the threshold increase to $913 per week will proceed or whether it will be abandoned. This issue may ultimately need to be decided by an appellate court or even the Supreme Court. Even as this issue remains unresolved, it is extremely important for employers to comply with the current provisions of the FLSA.