The right to overtime pay to be significantly extended
The law recognizes several exceptions to the overtime pay requirement under the Fair Labor Standards Act, 29 U.S.C. §§ 201, et seq., (“FLSA”): the Executive, Administrative, Professional, Computer, and Outside Sales exemptions. In other words, if an employer can show that one or more of these exceptions to FLSA coverage apply to employees, that employer need not provide overtime pay to those employees when they work more than 40 hours in a given week. Whether a white-collar exemption applies to employees depends on 2 basic lines of analysis, commonly referred to as the salary-based test and the duties-based test. The salary-based test concerns whether the employer pays employees above a certain amount such that employees are not eligible for overtime pay. The duties-based test examines whether the employees’ work involves specialized knowledge, the exercise of substantial discretion, and other factors such that the FLSA does not apply to those employees.
The first line of inquiry, the salary-based test, will change considerably under the new overtime pay rule proposed by the United States Department of Labor (“DOL”). According to the new overtime pay rule, as currently proposed, the salary minimum necessary to satisfy the salary-based test will be approximately double the existing minimum. The new salary minimum for 2016, which is when the DOL will likely implement the new overtime pay rule, will be set at the 40th percentile of all full-time salaried employees – that is, approximately $50,440 annually. Importantly, that salary minimum will be indexed to change annually based on the consumer price index or other similar methodology. None of this, however, will change the substance of the duties-based test for white-collar exemptions under the FLSA.
The DOL published the Notice of Proposed Rulemaking for Overtime in the Federal Register on July 6, 2015, and the DOL is now providing a 60-day period for interested parties to submit comments about the proposed new overtime pay rule to the DOL. After considering the public input regarding the new overtime pay rule, the DOL could make changes to the substance and/or scope. Once the DOL has finalized the new overtime pay rule, the DOL will publish it in the Federal Register. The new overtime pay rule will go into effect 30 days thereafter, likely in around the middle of 2016.
The proposed changes to the overtime pay rule should greatly expand the amount of employees covered by the FLSA and, consequently, the number of people who can pursue wage theft and similar wage claims successfully – whether as part of class actions, multi-plaintiff cases, or individual actions. Successful plaintiffs ordinarily recover liquidated damages, also known as double damages, and attorney’s fees as well as litigation costs in these cases. In short, employers would be wise to make sure that they do not misclassify employees as exempt under the FLSA or otherwise fail to pay their employees correctly.
