In 1938, The Fair Labor Standards Act (FLSA) was designed to guarantee most American workers a fair minimum wage and 1.5 times their regular rate of pay for any hours worked above 40 hours in a work week. However, as a result of both the depreciation of the salary threshold over the last several decades and a concerted effort on the part of politicians and employers, it had become extremely less effective. So, in December of 2016, the Department of Labor (DOL) took action on behalf of working people, and salaried employees all over the country.
Changes to the FLSA Overtime Threshold For Salaried Employees
First of all, the DOL updated the outdated FLSA rules by increasing the overtime threshold for salaried employees from $23,660/year ($455/week) to $47,476/year ($913 /week). To put it simply, now, unless you earn at least $47,476/year, you are entitled to overtime pay.
In order to meet these guidelines, some employers have to reevaluate salaried positions near the $47,476/year threshold. If the employee’s salary does not meet the new threshold, he or she will be classified as non-exempt, paid on an hourly basis, and receive overtime pay if they work more than 40 hours in a work week. If the employee’s salary meets the new threshold, they will be classified as exempt, continue to be paid a fixed salary, and will not receive overtime pay.
Changes to the salary threshold will now be increased every three years, as of January 2020 and are expected to be as follows:
- $51,168 by the year 2020
- $55,108 by the year 2023
- $59,351 by the year 2026
Changes for Highly Compensated Employees
The second change in FLSA rules only applies to a special exemption called the “highly compensated employee exemptions” (HCE). This is an overtime exemption that was created in 2004 which has a higher minimum salary requirement than the other exemptions but with other criteria that is more relaxed.
The salary threshold for the HCE exemption has gone from $100,000/year to $134,000/year. However, an employee must only have a fixed salary of at least $913/week to qualify for this exemption. The rest of his or her salary can be made up of pay that is tied to some performance or objective measure, such bonuses, incentives, and commissions.
Changes to the salary threshold for the HCE exemption will also be increased every
three years.
Other Notes
If your position is subject to change, you should be notified by your employer, supervisor, or your employer’s human resources department. In addition, there are a few things you need to be aware of:
- The FLSA rules regarding how you calculate the minimum salary amount have also been changed. Now, to reach the threshold of $913/week, your employer can include up to 10% ($91/week) in non-discretionary bonuses, incentive pay, or commissions, but only if these are paid on a quarterly basis at least. The rest of your salary must be at least $822/week.
- None of the changes to the FLSA’s overtime requirements have anything to do with your job duties or your benefits. They should only affect your FLSA classification and how you are paid.
- For non-exempt employees in most states, your standard weekly hours should not exceed 40. If you are asked to work more than 40 hours in a work week, you are entitled to be paid overtime at a rate of 1.5 times your regular rate of pay.
- Should you need help prioritizing your responsibilities to avoid having to work overtime, you should consult with your supervisor.
This may be a lot of information to take in, so if you have any questions, talk to your employer’s HR department or contact an experienced employment law attorney to receive the answers you need.