The Fair Labor Standards Act originated in 1938. The purpose was to set federal minimum wage (then $0.25/hour), regulate child labor and set exempt and nonexempt rules for overtime pay (originally 60 hours). There were a few changes—such as overtime pay now starts at over 40 hours—but generally, the rules for overtime stayed consistent until 2004.
Exempt employees are also known as white-collar workers. Nonexempt employees are subject to overtime—time and a half over 40 hours of work in a workweek, by federal standards. By definition, an employee is considered nonexempt unless the employee can fall into one of four categories of exemption: executive, administrative, professional and high salaried. Other categories have additional conditions—specifically, they are outside sales and computer positions.
In 2004, the Department of Labor revised the overtime regulations and made the exempt/nonexempt distinction more modern, with updated descriptions of job duties. In addition to modernizing the definitions, the DOL raised the salary test from $250/week to $455/week. The high salary test was also raised to $100,000 annually. Certain professionals, such as teachers, do not have a salary test.
Recently, the Department of Labor (DOL) has released proposed rules to update the exemptions from overtime. If a person is to be considered exempt, they must meet all of the following tests.
As of 2016 (date is estimated and subject to change), white-collar workers would need to fulfill a duties test. The duties test is different for each of three of the four classifications (executive, administrative, professional). This is consistent with the current rules. The DOL is also asking for comments regarding possible changes to the duties tests.
Next is the salary level test, which says a salary has to be a certain amount. Currently, that salary is set at $455/week or an annual salary of a little more than $23,000/year. For the three classifications above (executive, administrative, professional), these proposed regulations would raise that to $970/week, or a $50,440 annual salary. The high salary test would increase to $122,148.
The DOL is accepting public comments until September 4, 2015. Specifically, they’re seeking comments about whether to allow nondiscretionary bonuses—such as certain production or performance bonuses—to satisfy a portion of the standard salary test requirement.
After the comment period ends, the DOL will review all comments. It’s possible that there could be immediate implementation of the new regulations as proposed. However, it’s more likely that some revisions may be implemented, but another comment period, review and future implementation will occur. Keep an eye out for the next DOL notice sometime after September 4, 2015.