Overview: The Fair Labor Standards Act (FLSA) was written in 1938, at a time when manufacturing and agriculture dominated the American economy. The law's structure for classifying employees as exempt or nonexempt from minimum wage and overtime requirements reflects that simpler time. Although it has been updated periodically in the decades since, the FLSA's classification scheme is often difficult to apply to more modern service- and information-related jobs.
One type of employee that has proven especially difficult to fit into the employee classification structure – and has also been the plaintiff in hundreds of lawsuits – is managers. Today's lean, flexible workplace often necessitates that managers pitch in and perform nonexempt work, rather than stand around with a clipboard in hand directing other employees. The more nonexempt work they do, the more likely it is they need to be paid overtime.
Complicating matters is the fact that employees' job duties change frequently. Employers often make the mistake of classifying all employees with a particular job title as exempt. When changes in the workplace necessitate changes in an employee's job duties, that classification can be jeopardized. HR is well-positioned to stay on top of these changes, and must remember that FLSA classification is an ongoing challenge, not a one-time task.
In addition, it's important that employers follow state requirements regarding employee classification.
Trends: FLSA regulations effective December 1, 2016, will raise the minimum salary for most FLSA overtime exemptions from $455 per week to $913 per week. The minimum salary level will be automatically adjusted every three years based on the 40th percentile level of full-time salaried workers in the lowest-wage Census region. In addition, the regulations will allow an employer to satisfy up to 10% of the salary minimum by nondiscretionary bonuses, incentives and commissions that are paid quarterly or more frequently.
Author: Michael Cardman, Legal Editor
Updated to include information on a new law that exempts Puerto Rico from forthcoming overtime regulations.
The Supreme Court declined to hear a challenge to new regulations that prohibit third-party employers from claiming the Fair Labor Standards Act (FLSA) overtime exemption for companionship services providers and narrow the range of duties that FLSA-exempt services providers may perform.
Updated to reflect information on the Supreme Court of Connecticut ruling that the homes of an employer's customers are not necessarily 'places of business' under the state ABC Test for independent contractor classification.
As a result of new regulations that take effect December 1, 2016, it is likely that some employees who are currently exempt from the overtime requirements of the Fair Labor Standards Act (FLSA) will be reclassified as nonexempt.This Quick Reference chart provides details about the differences in workplace practices regarding employees classified as exempt or nonexempt.
Updated to reflect forthcoming laws that will provide for a declaration establishing a rebuttable presumption of an independent contractor relationship and establish independent contractor criteria for certain sharing economy workers.
The Arizona Declaration of Independent Business Status can be used to establish a rebuttable presumption of the existence of an independent contractor relationship under the state's labor code.
In Encino Motorcars, LLC v. Navarro, the Supreme Court held that courts do not have to follow a 2011 regulation from the US Department of Labor that excludes auto dealership "service advisors" from an exemption from the overtime requirements of the Fair Labor Standards Act (FLSA).
Updated to include forthcoming state developments regarding right to request laws.
Updated to include whistleblower immunity notice under the federal Defend Trade Secrets Act, effective May 11, 2016.
Two new How To's, a Checklist, a Task and a Hot Topic have been added to help an employer prepare to comply with the new Fair Labor Standards Act (FLSA) regulations that take effect December 1.
HR guidance on complying with the FLSA and state employee classification requirements. Support on following rules and regulations regarding this topic.