• FLSA Overtime Regulations


    Overtime Rule Change

    When are the new rules effective?   December 1, 2016

    What is the salary threshold to remain exempt?   Salary requirements will change from $ 455 per week to $ 913 per week.

    How often will the salary threshold change?   Salary requirements will increase every three years. Next scheduled increase is January 2020. 

    How do I know if my employees now qualify as exempt (from overtime) under the duties test? The duties test has not changed with the December 2016 regulation update. 

    What is the duties test? EAP categories are used for duties testing.  EAP is an acronym for Executive, Administrative and Professional.  Each category has its own requirements to be considered exempt from overtime. 

    What is the duties test for an Executive employee? To be considered exempt from overtime the executive employee must primarily be responsible for managing the business or subdivisions of the business and direct two or more other employees and have the authority to make hiring and firing decisions. 

    What is the duties test for an Administrative employee? To be considered exempt from overtime the administrative employee must primarily perform office or non-manual work directly related to management and business operations and exercise discretion and independent judgment for matters of significance.  

    What is the duties test for a Learned Professional employee? To be considered exempt from overtime the learned professional employee must primarily perform work requiring advanced knowledge in a field of science or learning that is customarily acquired by a prolonged course of specialized intellectual instruction.  The work performed is predominantly intellectual in character which includes work requiring consistent exercise of discretion and judgment. 

    If my employee makes $ 913 or more per week are they automatically considered exempt from overtime? No they must meet the appropriate duties test in addition to meeting the salary requirement.  There are certain exemptions for highly compensated employees. 

    If an employee is highly compensated are they automatically considered exempt? Not always.  If an employee earns $ 134,004 or more he or she is considered highly compensated.  To be exempt from overtime the employee must perform at least one of the duties of the exempt EAP.

    I pay bonuses and commissions to salaried employees. Do the bonus or commission amounts count as salary to meet the $ 913 per week requirement?  Yes, at least partially. Non-discretionary incentive payments can be used to satisfy up to 10% the salary test requirement. Discretionary payments cannot be considered.  The employee must receive at least 90% of the standard salary level required for each pay period.  If at the end of the 13 week quarter the employee has not received 100% of the salary requirement the employer has one pay period to “catch up” the shortfall. 

    What is the difference between discretionary and non-discretionary incentive payments? Non-discretionary payments are tied to performance, productivity or profitability.  E.g. a bonus based on a specified percentage of profits generated by the business or a commission based on a percentage of sales generated by that employee.  Discretionary payments are variable pay where an employer provides compensation for reasons not established in advance.  

    Are Outside Sales employees exempt from overtime? To be considered exempt from overtime the outside sales employee primary duty must be making sales as defined by FLSA and regularly work away from the employer’s place of business. FLSA defines making sales as: “sale, exchange, contract to sell, consignment for sales, shipment for sales or other disposition. It includes the transfer of title to tangible property, and in certain cases, of tangible and valuable evidences of intangible property.”  There are no salary or fee requirements for exempt outside sales employees. 

    More questions? Feel free to contact Denise Lucas at 636-530-1040 to review your particular job descriptions and duties to ensure you properly have employees classified as exempt from overtime.