FLSA Overtime Rules Finalized: U.S. Department of Labor Raises Salary Threshold for Exempt Employees

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The U.S. Department of Labor recently issued new overtime rules raising the salary threshold for “exempt” employees under the Fair Labor Standards Act, as anticipated within the Obama Administration’s closing months.  The new rule doubles the minimum salary from $455 per week ($23,660 annually) to $913 per week ($47,476 annually), effective December 1, 2016.  To address these legal changes and their implications, the Evangelical Council for Financial Accountability is offering a webinar on June 23, 2016, at 12 pm Central, with attorney Sally Wagenmaker as one of the featured speakers.  For more information and to register, please visit www.ecfa.org/Events.     

Background Basics

The proper classification of employees for FLSA purposes as “exempt” or “non-exempt” is an ongoing consideration for many nonprofits.  The FLSA imposes significant requirements for non-exempt employees, including minimum hourly wage amounts, “time-and-a-half” overtime pay obligations for more than 40 hours worked per week, and accompanying record-keeping requirements. An employer’s misclassification of its employees as exempt can result in serious liability under the FLSA when an employer fails to properly pay overtime or minimum wages. 

Under the DOL’s long-standing rules, the test for exemption is threefold and based on the following: (a) type of work; (b) whether the employee is salaried; and (c) salary amount.  The new DOL rule focuses on the salary amount.  Additional background information about FLSA requirements and development of the new DOL rule is contained in our law firm’s blogs – see August 2015, November 2015, and March 2016

Implications of New Salary Threshold

What does the new salary threshold mean for nonprofit employers?  First, additional paperwork: increased record-keeping, more detailed job descriptions, and employee handbook updates will all be needed.  Second, compliance issues: employers will need to upgrade their written materials and actual practices to ensure that no FLSA violations occur.  Third, financial impact: the new DOL rule may make employees more expensive, depending on how nonprofits respond to this change.  Unfortunately, it does not seem that either nonprofits or their employees will fare any better overall.

Are there ways to avoid application of the new FLSA rules?  Perhaps, although exceptions are unlikely and probably quite limited.  For example, as noted in the DOL’s summary, FLSA coverage may be based on “enterprise” or “individual” applicability, which in turn depend on specific business activity aspects and whether employees engage in interstate commerce, respectively.  Given the Internet’s widespread usage within work environments, however, most employees will likely enjoy “individual coverage.”  Other exemptions may apply, such as a few jurisdictions’ recognition of the ministerial exception to wage claims.

Join Sally Wagenmaker and Bryan Cave attorney Susan Campbell at the ECFA webinar on June 23 to learn more about the new rule’s implications, coverage aspects for nonprofits, options for mitigating their impact, and operational compliance considerations.  Registration is limited and is filling up quickly, so please register soon if you would like to participate.  The ECFA is also expected to issue related guidance materials after the webinar.