The Fair Labor Standards Act is a Federal statute that, in essence, and put simply, requires that all workers of the 50 states and territories who are not “exempt” from being entitled to overtime pay (for work in excess of 40 hours in a given week) must get that pay. It’s a long statute and there are a lot of twists and turns, but that, in essence, is it.
For a long time, the “big three” exemptions for wage and hour were: professionals, administrators, and executives. These terms, in essence, are fairly obvious. If you were any one of these three things (defined by the statute), then your employer could ask you to work more than 40 hours and not give you overtime. Most people who were properly one of these three things were probably on salary anyway.
Yet, the terms “professional,” “administrator,” and “executive” aren’t necessarily easy to pin down once you get into the devil in the details, and, as you might expect, many employers, over the decades, have attempted to take people who aren’t one of these three things, and make those people seem like they are. Why? To deny those people overtime pay in excess of 40 hours. Sometimes, employers got away with it. Sometimes, conscientious employment rights lawyers (like yours truly and our firm) challenged them successfully on this dishonest and sneaky tactic.
Yet during those occasions where the employers succeeded in this trick, they were able to get away with paying such folk pretty low “salaries,” while still making it look like the person who got the salary was a “professional” or “administrator” or “executive” when they really weren’t. The yearly salary wasn’t, in other words, a factor the courts considered when deciding whether people fell into those exceptions or not.
That’s about to change. On May 18, 2016, the U.S. Department of Labor (DOL) made a “final” ruling changing how the Fair Labor Standards Act applies for these supposedly “white collar” exempt “professionals,” “administrators” and “executives.”
In order to properly qualify as “exempt,” such a person must now be paid $47,476.00 or more in annual compensation. If the person doesn’t make that much or more, then the presumption seems to be that the person isn’t exempt, no matter what the employer says. Employers may count nondiscretionary bonuses, incentive payments and commissions (that are paid at least quarterly) toward at least ten percent of that minimum threshold.
This isn’t a perfect solution to the ongoing problem of employers attempting to get around the requirements of Federal and State Wage and Hour laws, but it’s a huge improvement. If an employer truly wants to say somebody is “professional” or “executive” or “administrative,” then they should pay that person accordingly. Obviously, paying the person at least as much as the threshold or more doesn’t automatically grant the employer immunity from any wage and hour claim that might be brought, but it certainly puts the potentially wronged employee in the driver’s seat if the employee is paid less than the threshold.
This will likely affect many employers, but all to the good and all for the benefit of the vast majority of Americans who work for others. This is fair and it makes sense. It allows employers to still be “capitalists” and make a significant profit, but it requires that workers be treated fairly.
It’s about time.