Four Weeks Until Overtime Changes: Are You Ready?

On Tuesday, October 18, I presented about upcoming changes to the Fair Labor Standards Act (FLSA) exemptions to Saratoga Chamber members, hosted by Quad Graphics, 1 Marsel Drive, in the Grande Industrial Park, Saratoga Springs. Given the applicability of the rule to the business community, and the questions asked at the presentation, this column is intended to give a brief overview of the rule and upcoming changes. The “default” condition under the FLSA is for employees to be “non-exempt:” for them to be paid the minimum wage, and overtime – one and one-half times their regular rate of pay – when they work over 40 hours in a week. Certain employees may be classified as “exempt,” but it is the employer’s burden to prove FLSA exemption status. To be exempt, employees generally must meet these three requirements: (1) be paid on a salary basis, (2) perform duties that are considered to be exempt, and (3) be paid at least a particular minimum salary level. The salary basis test boils down to the contention that employees are paid a regular salary each week, regardless of the hours worked that week. For example, if an exempt employee comes to work two hours late, an employer cannot dock two hours of pay; if the employer does so, the employee will lose his or her exempt status, because the employer is essentially treating that person as an hourly employee. There are exceptions to this rule, but they are limited. The duties test is more difficult. There are a number of categories of exempt duties, but the most well known are the “white collar” exemptions: the executive, administrative, and professional exemptions. There is not enough space in this column to do justice to the requirements for these exemptions, and they are often misconstrued – for example, the administrative exemption requires more than just doing administrative work – so check with counsel about these requirements. The upcoming change, effective December 1, is to the minimum salary level for employees to be exempt. The current FLSA minimum for exempt employees is $455 per week, and the current New York State minimum is $675 per week for executive and administrative exempt employees. As of December 1, the FLSA minimum increases to $913 per week – thus, many employees currently classified as exempt who make less than $913 per week will no longer be exempt as of December 1 unless their salary is increased. And if it is not, these employees must be treated as non-exempt; employers may decide to pay these employees hourly, or still pay them on a salary basis, but pay the employees overtime when they work more than 40 hours. Which option businesses ultimately employ depends on a variety of financial, human resources, and legal factors, but they should be planning now to ensure they are in compliance as of December 1. Michael D. Billok, Esq. is an attorney in the Albany office of Bond, Schoeneck and King. He is also the president of the board of the Saratoga Adult and Senior Center and a board member of the Saratoga County Economic Opportunity Council.