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Overtime Changes May Be Coming

In June 2016, we posted an article about the new overtime law that was to take effect on December 1, 2016. In November, 2016, a District Judge in the Eastern District of Texas enjoined (blocked) the expansion of the Overtime Pay Exemption under the Fair Labor Standards Act (FLSA). The proposed change would have allowed more workers to be entitled to overtime pay by increasing the exemption rate from $23,600/year (or $455/week) to $47,476/year (or $913/week). The new law never went into effect.

In order for employers to be exempt from the overtime pay requirement, the FLSA requires that an employee earn at least $23,600 annually and be employed as an executive, administrative, professional, computer-specialist, or outside-sales position. Whether or not an employee’s position fits into one of the exempt roles typically depends on whether the “primary duties” tests is met.The primary duties test was at the heart of the Texas court’s determination to refuse to enforce the the law that was to take effect at the end of 2016, but they may be changing.

The primary duties test requires that the employee’s primary duties include the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers. In addition, the employee’s primary duties must include the exercise of discretion and independent judgment with respect to matters of significance.

The Department of Labor defines “primary duty” as the principal, main, major or most important duty that the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.

In simpler terms, the employee must perform job duties that are: 1) office or non-manual work, which is; 2) directly related to management or general business operations of the employer or the employer’s customers, and 3) a primary component of which involves the exercise of independent judgment and discretion about 4) matters of significance.

The Trump Administration has signaled that it intends to issue its own changes to the Fair Labor Standards Act in Fall 2018, and the administration’s new rule is expected also to increase the salary limit. Thus, while the previous changes to the Fair Labor Standards Act affecting overtime pay for exempt employees was blocked before it became effective, changes may be on the horizon. They haven’t been announced yet, but they are expected soon.

What this likely means is that fewer people will be exempt from the FLSA overtime payment rule, and more people will be entitled to overtime pay, including some people who are now exempt from receiving overtime pay. This may be good news for employees and bad news for employers trying to keep personnel costs down. Keep an eye out for the changes that are believed to be coming.

Edward J.  Boula III
Drendel & Jansons Law Group
111 Flinn Street
Batavia, IL 60510
630-406-6179 fax
[email protected]