Recently, the Department of Labor (DOL) announced a newly proposed rule that would increase the minimum weekly salary threshold (standard salary level) used to determine whether an employee is exempt from the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA), and the annual compensation level for Highly Compensated Employees (HCEs).
Under the newly proposed rule, the standard salary level would increase from $455 per week to $679 per week, that is, approximately $35,308 per year. Employers would be allowed to use nondiscretionary bonuses and incentive payments, including commissions, to satisfy up to 10% of the standard salary level. The compensation level for HCEs would increase from $100,000 per year to $147,414 per year. According to the DOL, an estimated 1.1 million workers would lose exempt status under its newly proposed rule in the absence of action by their employers (e.g., a pay increase). This is close to the number of workers who were affected by the increase in the standard salary level to $455 per week in 2004. Although the DOL intends to update the standard salary and compensation levels every four years, the newly proposed rule does not call for automatic adjustments.
Certain variances have been proposed by the DOL for U.S territories, such as, Guam, American Samoa, etc.
The public will have 60 days to comment on the newly proposed rule beginning on the date of its publication in the Federal Register. It is expected to take effect in January 2020.
The newly proposed rule does not change the duties test, which employees would still have to meet (in addition to being paid on a salary basis) in order to qualify for exemption from the minimum wage and overtime provisions of the FLSA.
FLSA Overtime Violations
Recently, the U.S. Wage and Hour Division (WHD) found that an Alabama nursing home violated the overtime provisions of the FLSA by using its employees’ base hourly rate to calculate overtime pay and failing to include shift differentials in the calculation. As a result of the WHD’s investigation, the nursing home will pay over $96,000 in back wages to 92 employees for violating the FLSA’s overtime provision and various recordkeeping requirements.
The WHD also found violations of the FLSA’s overtime provision and recordkeeping requirements by a Washington residential care company, which provides around-the-clock care for adults. According to the WHD, the company improperly deducted 8 hours for sleep time for each overnight shift even though the workers were never relieved from duty for an uninterrupted 8 hours. The company will pay $222,426 in back wages and liquidated damages to 19 employees. WHD also assessed $17,442 in civil penalties based on the “willful” nature of the company’s violations. This was the second time in five years that the company was cited for violating the FLSA.
These situations serve as an important reminder to seek the advice of experienced legal counsel in determining how to properly calculate overtime pay in an effort to avoid a potential costly mistake.