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
The US District Court for the Eastern District of Texas ruled that the US Department of Labor (DOL) exceeded its authority when it raised the minimum salary for most overtime-exempt employees to $47,476 last year.
Updated to reflect information on a 7th Circuit ruling regarding the US Department of Labor's six-factor test to determine whether an intern or trainee qualifies as an employee.
Effective December 31, 2017, North Carolina will create a new Employee Classification Section within the North Carolina Industrial Commission to investigate reports of employee misclassification and assist other state agencies in recovering back wages, taxes and more.
Updated to reflect forthcoming amendments to the overtime exemption for private elementary and secondary school teachers.
Updated to reflect information on a court ruling clarifying the coverage of limited liability companies under unemployment insurance.
Updated to include a forthcoming amendment regarding the overtime and recordkeeping exemption for employees of seasonal amusement and recreational establishments.
The US Department of Labor (DOL) is asking employers to offer their feedback on a variety of questions relating to its plans to update the Fair Labor Standards Act (FLSA) overtime rules.
HR guidance on complying with the FLSA and state employee classification requirements. Support on following rules and regulations regarding this topic.