DOL Mandates 100% Increase in Minimum Wage to Please Fair Labor Standards Act White Collar Overtime Exemptions

On May 18, 2016, the U.S. Department of Labor (” DOL”) released its last rule upgrading and revising the overtime exemptions for executive, administrative, and expert workers under the Fair Labor Standards Act (” FLSA”), 29 U.S.C. 201, et seq. (the “Final Rule”). If reclassified, companies have to choose whether to reduce their hours worked to avoid paying overtime, whether to reallocate hours worked among existing workers, and how reclassified staff members must record their time worked, among a host of other considerations. Best intellectual property lawyers can be found here.


The Final Rule has another significant feature: automatic increases to the limit income level every three years. This is the first time in its 78 years of implementing the FLSA that the DOL has asserted that it has the authority to mandate automated wage level boosts. However, there is substantial doubt about whether this element of the Final Rule adhere to Section 13 of the FLSA.

Executive, Administrative, and Professional Exemptions Under the Final Rule

The FLSA usually needs employers to pay workers at least the base pay, and overtime if workers work more than 40 hours in a week. 29 U.S.C. 206-07. The statute, however, excuses specific workers such as those used in administrative, executive, or expert positions from these protections. See 29 U.S.C. 213(a)(1); 29 C.F.R. 541.

To qualify for the executive, management, or professional exemption, an employee has to please 3 criteria:

The worker needs to be paid on a wage basis not subject to reduction based on quality or quantity of work (” Salary Basis Test”);

The worker’s wage should satisfy a minimum level (” Salary Level Test”); and.

The worker’s main task responsibilities need to include the kind of work related to executive, administrative, or expert staff members (” Duties Tests”).


The Final Rule typically keeps these 3 requirements but sets the Salary Level Test at the 40th percentile of incomes of full-time employed employees in the lowest-wage Census Region, currently the South, which is $913 weekly or $47,476 every year. Hence, the Final Rule more than doubles the Salary Level Test from its current level of $455 weekly.

Furthermore, the Final Rule increases the minimum salary to qualify for the “extremely compensated” staff member exemption from $100,000 every year to the 90th percentile of full-time employed workers nationally, which is currently $134,004. To qualify for this exemption, in addition to satisfying the salary requirement, an employee has to routinely carry out a minimum of among the main responsibilities of a professional, management, or executive employee, and not carry out manual work.

The Final Rule also sets automated increases in the threshold wage levels on January 1 every 3 years, beginning January 1, 2020.

In enacting the Final Rule, the DOL noted its efforts to reduce burdens on employers. The DOL did not change any of the Duties Tests, thus leaving in effect the now-familiar tasks requirements of the professional, management, and executive exemptions. In addition, the Final Rule allows companies to count nondiscretionary bonus offers and commissions made by staff members as approximately 10 percent of the employee’s annual

income, if payments are made a minimum of quarterly. The following chart summarizes exemption requirements under the Final Rule:

(Click here to see table).

To ensure compliance with the Final Rule by December 1, 2016, companies should think about immediately taking the following steps:

Currently, employees who make a salary of at least $455 per week, or $23,660, are exempt as long as they also perform job duties that satisfy one of the Standard Duties Tests. Under the brand-new DOL regulations, presently exempt employees will no longer be exempt from the FLSA’s requirements unless they earn an income of at least $913 per week, or $47,476 per year.

Consider how business operations will be influenced by staff member reclassification or wage adjustments, and design a strategy best fit to meet the requirements of the company. The DOL’s new regulations do not need employers to reclassify presently exempt staff members. Employers may provide pay raises to bring workers’ salaries up to the brand-new salary-level threshold, decrease or get rid of overtime hours for individuals who do not satisfy the brand-new Salary Level Test, pay overtime to employed staff members who no longer certify for an exemption, or some mix of these choices.

q2Consider impacts to staff member relations, timekeeping and payroll systems, and the requirement for training to maintain compliance with the FLSA’s recordkeeping arrangements. If a company decides to reclassify some staff members as non-exempt, it must likewise think about the staff member relations implications. This includes the impact on spirits of workers who consider themselves supervisors and specialists, now have to record their time worked. Companies likewise must consider the impact the new classification may have on payroll, timekeeping, and other internal recordkeeping operations. Newly non-exempt employees may be not familiar with tracking and reporting the hours they work and might require training to guarantee all records are maintained properly.

Think about how potential changes interact with other FLSA requirements. Employers need to also be aware that any changes to its business design or worker classification may implicate other provisions of the FLSA. For example, employers ought to advise reclassified employees to tape perpetuity worked, and carry out policies prohibiting off-the-clock work if required. If employers decide to reclassify staff members to non-exempt and overtime eligible, companies ought to think about whether added payments, such as vacation and stock rewards, should be consisted of in the regular rate of pay for the functions of calculating overtime.

The Tao of Universities & Fair Labor Standards Act

The Tao Te Ching recommends that it is in some cases needed to learn to see the events in our world backwards, completely and upside down.

Universities have simply such a chance for an imaginative response to the brand-new wage thresholds for the Fair Labor Standards Act (FLSA) regulations, called the overtime or the white collar exemptions. These guidelines are arranged for main release in May or early summertime 2016 and are anticipated to more than double the base payment of eligible employees on schools from $23,660 to $50,440.


College leaders can see these policies as punitive and destructive and/or view them as a path to equity and financial justice. In truth, it is a both/and scenario in which the pain to comply is deep and the need to bear it is similarly so.

The method which leaders respond will affect morale and performance on campuses. The best suggestions of the day are to think like the Tao recommends and prepare early and well.

Dedication to a living wage is tough to debate, particularly for those faculty members and students who invest so deeply in the system of college in order to work in it. The average expense of a Master’s degree in 2015 was between $30,000 and $120,000 depending upon the kind of organization.

For those university workers who earn less than $50,440, this significant modification in base wage represents remarkable development in an unsure job market and in university towns where real estate and other expenses of living typically increase.

Why is the base change so high? The 2015 poverty guideline is $24,450 for a family of 4.

At the most fundamental level, the salary threshold for exempt staff members ought to meet or surpass the poverty standard. These workers often work more than 40 hours implying they might fall below the poverty guideline when real per hour wage is computed.

q5Like the rest of America, colleges and universities have not changed the minimum wage trajectory quickly enough to equal the cost of living. The income limit for campus payrolls requires an overhaul for several years, so the quantity of correction needed to bring equity is huge.

Colleges and many of the associations advocating for them, have produced a considerable list of issues about the new regulations, summed up as: Too high. Excessive. Too litigious.

There is fact in each of these evaluations and this change was revealed in 2014 and is inevitable. Now it is time to count on the work of compliance and to communicate the positive results for workers and organizations.

Universities might now have to cut programs, positions and hours. These are extremely difficult decisions, however not unlike the ones that should be made about bringing diversity and equity to faculty rosters and student populations.

The methods which all these types of choices are made and communicated will demand the very best of Chancellors, Presidents and Boards and perhaps, a little the Tao while doing so.

As it acts in the world, the Tao is like the bending of a bow … it adjusts excess and deficiency so that there is a best balance. It extracts from what is too much and provides to exactly what isn’t enough.

Non-profits are all set for the new overtime policies


Should an employer be able to make someone who’s paid far less than a middle-class wage work long overtime hours without paying anything for that work? State no, and you concur with the majority of Americans. Regrettably, under enduring federal overtime guidelines, companies have actually typically provided staff members managerial-sounding job titles, paid them salaries as low as $23,660, demanded long work hours that involved little real managing and paid them absolutely nothing at all for their overtime. This is a perversion of the country’s overtime law and its time to fix it.

The Fair Labor Standards Act, which ensures time-and-a-half spend for work surpassing 40 hours a week, has always exempted particular staff members with high-level responsibilities and salaries from overtime pay. (The concept is that their top-level position gives them sufficient bargaining power to guarantee they won’t work excessive hours without adequate payment). Like lots of laws, it’s great in theory, however not so great in practice. That’s because the U.S. Department of Labor, which is responsible for defining and upgrading the so-called white-collar exemption guidelines, cannot do so over the majority of the previous 40 years. When it finally did act in 2004, it set such a woefully insufficient income threshold for mandatory overtime pay (listed below $23,660) and such a toothless test for who’s an exempt manager or executive that companies have quickly manipulated the guidelines, robbing millions of low- and middle-income employees of the benefits meant by the overtime premium: more spend for longer hours, fewer workers with unsettled hours, and extra tasks to fulfill the requirement for labor.


q8Thankfully, the Labor Department is repairing this problem with an update that lines up the exemptions guidelines with today’s economy and the function of overtime pay protections. Not surprisingly, opponents are ratcheting up their doomsday forecasts of catastrophe if more working people are paid for all the hours they work. And one of the more disquieting objections, fanned by company interests like the Chamber of Commerce, is that the rules will bankrupt non-profits and undermine their services.

As leaders of two non-profits one offering direct services to countless Northern Virginians, and the other a supporter for low-wage workers and the unemployed we highly believe the overtime upgrade is sorely required for our customers and constituencies and our own workforces. We likewise feel the rules ramifications for non-profits are misinterpreted, and its prospective effect vastly (and by some, actively) overstated. Here’s why.


q7As an outcome, the last rule will not use to staff members engaged solely in carrying out any non-profit’s direct charitable functions. It’s real that individual non-profit staff members engaged in interstate commerce (e.g., a development director) are covered under the FLSA, regardless of whether their non-profit employer is covered; and a non-profits ancillary business operations a thrift store to support the charity, for example might lead to business protection for workers of the business.


With earnings flat, the minimum wage low, and the existing overtime wage threshold listed below the poverty line for a household of four, people trying to make a living from work are swelling public support and personal charity rolls. Many low-paid workers currently treated as exempt, specifically in retail and food service, require the defense that the updated rule will supply to make sure overtime pay for overtime hours, or less overdue overtime and more time for themselves, their households or other pursuits, including education or 2nd tasks.


Our company believe that covered non-profit staff members making below the income threshold should likewise benefit from the guideline. The existing salary threshold for exemption is a disaster and disgrace, consigning millions of workers throughout the economy and in every sector to long hours with no pay when what they need and deserve are higher incomes and fairer schedules. Non-profits should be in the lead of this motion for simply earnings and work hours.


We acknowledge it might be challenging for some non-profits to accommodate the brand-new guidelines. As mission-driven organizations, non-profits don’t always have the time, flexibility or luxury to pay as much or designate work hours as we’d like. And operate in the non-profit sector can take a toll, with longer hours, lower pay and often wrenching psychological demands spelling burn-out for many. By motivating non-profit leaders and employees alike to be conscious of how we invest our time and more deliberate in designating work among workers and staffing levels, overtime reform can help us achieve a balance that works finest for us all, consisting of the customers we serve.