New Overtime Regulations for the Fair Labor Standards Act

by | Jul 15, 2016

What is the Fair Labor Standards Act?

Chapter 8 of Title 29 of the U.S. Code, also known as the “Fair Labor Standards Act of 1938” (or FLSA), was passed by Congress with the express purpose of preventing and prohibiting “labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers.”[1] Section 207 of the FLSA sets the limit on the maximum number of hours an employee may work in a given week and be compensated at his or her regular hourly rate of pay at 40 hours. For any hours worked over 40 hours in a given week, the employee is entitled to receive an hourly wage equal to no less than one and one-half times his or her agreed-upon hourly rate of pay. However, Section 213 of the FLSA provides certain exemptions to the overtime requirement based on the type of position held and/or the industry of employment.[2] The first group of employees that are exempt from the standard set forth in Section 207 are salaried employees who hold “bona fide executive, administrative, or professional” (or EAP) positions.[3] A salaried employee is one who is compensated based on “a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed.”[4] In Title 29 of the Code of Federal Regulations, it was further specified that only those employees working in EAP positions who earn at least $455 per week (or $23,660 annually) may be considered exempt from the new overtime regulations.[5]

New Overtime Regulations

In 2014, the Department of Labor, at the direction of President Obama, began the process of amending the Code of Federal Regulations in order to alter the definition of an EAP exempt employee. The new regulation, known as “the Final Rule,” was published in May of 2016 and increased the required weekly earnings for an EAP exemption from $455 per week (or $23,660 annually) to $913 per week (or $47,476 annually). The new requirements for EAP exemption will go into effect on December 1, 2016. In order to maintain an EAP employee’s exempt status, an employer must increase the employee’s salary to at least $913 a week. Otherwise, EAP employees making less than $913 per week will be entitled to overtime pay equal to no less than one and one-half times his or her regular hourly rate of pay after the new regulation becomes effective on December 1, 2016. Other than changing the required weekly income, the definition of EAP employees was not changed by the new regulation.[6]

Who will be impacted?

When the final rule goes into effect, over four million Americans, including about 100,000 Tennesseans, who were formerly considered exempt from overtime regulations, will no longer fall into the exempt category and will be entitled to receive either salary increases up to at least $913 per week (or $47,476 annually) or to receive time-and-one-half compensation for any hours over 40 worked per week.

[1] “29 U.S. Code Chapter 8 – FAIR LABOR STANDARDS,” https://www.law.cornell.edu/uscode/text/29/chapter-8.
[2] “29 U.S. Code § 207 – Maximum hours,” https://www.law.cornell.edu/uscode/text/29/207/.
[3] “29 U.S. Code § 213 – Exemptions,” https://www.law.cornell.edu/uscode/text/29/213.
[4] “Questions and Answers,” https://www.dol.gov/whd/overtime/final2016/faq.htm#3.
[5] “Fact Sheet #17A:  Exemption for Executive, Administrative, Professional, Computer & Outside Sales Employees Under the Fair Labor Standards Act (FLSA),” https://www.dol.gov/whd/overtime/fs17a_overview.htm.
[6] “The Overtime Rule,” https://www.dol.gov/featured/overtime.

If you believe you may be improperly classified and are not receiving the overtime pay you deserve, we encourage you to seek experienced legal counsel to discuss your legal options.