A new regulation issued by the United States Labor Department last week expanded the amount of employees who can qualify for overtime pay. The new regulation will take effect December 1, 2016, and updates which salaried employees are entitled to the Fair Labor Standards Act (“FLSA”) minimum wage and overtime pay protections. Previously, salaried employees earning up to $23,660 per annum were eligible for overtime pay, or time and a half, for every hour worked over forty (40) hours per week. Now in the first salary increase since 2004, salaried employees earning up to $47,476 annually will be entitled to the same benefit. Further, under the new regulations, the salary cap will be updated automatically every three (3) years, based on wage growth over time. The rule will also raise the “highly compensated employee” (“HCE”) threshold from $100,000 to $134,004.
What does this mean for employees?
There are approximately 132,000 employees in New Jersey who will qualify for these expanded FLSA protections. If you are a salaried employee in one of these states, earning less than $47,476 annually, and work more than forty (40) hours per week, you may be entitled to overtime pay. If you earn over $47,476 annually, you may still be entitled to overtime pay.
Above the threshold, an employer must apply a “duties test” to each employee to ensure that they have the type of job which Congress meant to exclude from overtime protection. In order to meet the “duties test” and therefore be exempt from overtime requirements, the employee’s actual job duty must be to act as a true “executive,” “administrative” or “professional” employee. Under New Jersey law and in accordance with Federal regulations, an employee whose primary duty is executive, administrative or professional in nature is classified as exempt from the overtime requirements of the FLSA. Each of these types of duties is detailed thoroughly in the FLSA.
The HCE threshold is the level above which an employee is almost presumptively unable to obtain overtime pay. The HCE threshold of $134,004 can be paid via commissions, nondiscretionary bonuses or other non-discretionary compensation. Once an employee reaches the HCE threshold, the duties test need not be exercised to determine whether the employee is entitled to overtime pay. Rather, employers must complete a modified duties test where they are only required to show that the employee performs office or non-manual work, and the employee customarily performs at least one of the duties of an exempt executive, administrator or professional employee.
What does this mean for employers?
The definition of employer under the FLSA is expansive. Employer under the FLSA is defined as “any person acting directly or indirectly in the interest of an employer in relation to an employee…” Unlike the Family Medical Leave Act, in determining who is an employer under the FLSA there is no minimum amount of employees necessary or geographical limitation. Luckily, the new regulations do not take effect for six (6) months, which gives employers time to understand and implement the rule. Employers will have a choice under the new regulations. They can either: (1) Raise their employees’ salaries to at least the new salary threshold; (2) Limit employees to working less than forty (40) hours per week; or (3) Pay employees overtime rates for any additional hour worked over forty (40) per week. Employers should carefully review their present overtime and salary policies and procedures to determine which employees will be affected by the new rule.
Cherry Hill employment lawyers at McOmber McOmber & Luber, P.C. can provide guidance to employees and employers with regard to the new FLSA regulations. Contact our offices serving Evesham Township, NJ or Middletown, NJ today, toll free at 888-396-0736 or contact us online.