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Overtime Regulations Changes 

Update: August 31, 2017

Today’s ruling in State of Nevada v. U.S. Department of Labor was expected. 

The federal judge in Texas who temporarily enjoined the Obama Administration’s Overtime Final Rule late last year ruled today that the Final Rule is invalid because the U.S. Department of Labor exceeded its authority in setting a high salary-level test that denied exempt status to executive, administrative, and professional employees without regard to their job duties. The judge interpreted the Fair Labor Standards Act as granting the Labor Department the authority to define and delimit the white-collar exemptions based primarily on the duties they perform. Because the Overtime Final Rule would have revoked the exempt status of four million workers based solely on the increase in the salary level and without regard to the work they perform, the judge invalidated the rule.

Update: July 28, 2017

The U.S. Department of Labor (DOL) has published a Request for Information (RFI) in the Federal Register seeking comments from the public about how the white-collar regulations under the Fair Labor Standards Act should be updated. The Obama Administration had sought to revise the same regulations, but that effort was blocked by a federal court in late 2016. Under current law, employees working in a “bona fide executive, administrative, or professional capacity” are not eligible for overtime pay.

Federal regulations determine which employees fall within those categories. In most cases, employees will be considered exempt from overtime if (1) the employee is paid on a salary basis (“salary basis test”); (2) the employee receives at least a minimum specified salary amount (“salary level test”) which is currently set at $455/week; and (3) the employee's job primarily involve executive, administrative, or professional duties as defined by the regulations (“duties test”). The questions posed by the Labor Department in the new Request for Information give the public the opportunity to weigh in on whether and how those tests should be changed in future DOL rulemaking.

The deadline for submitting comments to the Department is September 25, 2017.

You can read the National Council of Nonprofits full analysis of the update here

Update: June 30, 2017

The Department of Justice filed its reply brief with the Court. The case is now fully briefed (State of Nevada, et al. v. United States Department of Labor, et al., No. 16-41606 (5th Cir.)).

Update: December 1, 2016

The Department of Justice on behalf of the Department of Labor filed a notice to appeal the preliminary injunction to the U.S. Court of Appeals for the Fifth Circuit.

Update: Nov 22, 2016

Federal Judge Amos L. Mazzant of Texas entered a temporary injunction that postpones the December 1, 2016 implementation date of the Fair Labor Standards Act. This applies across the United States. You can read the decision here and the summary here

On May 18, 2016, U.S. Labor Department announced overtime final regulations that, when they go into effect on December 1, 2016, will mean that many employees earning less than $913 per week ($47,500 annually) will be entitled to overtime compensation, regardless of whether they are currently classified as executive, administrative, or professional (white-collar) workers. The final rule applies to employers in all sectors, but in an effort to address longstanding confusion about how the Fair Labor Standards Act (FLSA) and the overtime regulations apply to nonprofit employers and employees, the Department of Labor (DOL) also published a special overview and guidance for nonprofit organizations. 

Nonprofits with budget years ending on June 30 will need to develop new budgets for the fiscal year beginning in six weeks that take these new changes into account. Nonprofits with budget years ending on December 31 have more time to adjust and plan for 2017. 

Listen to the recording here.

Key Takeaways

  • Salary Level Threshold: The new regulations will raise the standard minimum level for salaried, exempt workers from $455 per week ($23,660 per year) to $913 per week ($47,476 per year) 
  • Effective Date: December 1, 2016. The new rule does not phase in the higher salary thresholds over a longer period of time, as had been requested by many commentators during the rule-making process
  • Automatic Increases: The final rule establishes a mechanism for automatically updating the salary and compensation levels every three years, with the first update to take place in 2020
  • Enterprise Coverage: All employees of an organization will be covered by the FLSA and overtime regulations if the entity has annual revenues of at least $500,000, measured by volume of sales made or business done. 
  • Individual Coverage: Even if the employer does not meet the standard for “enterprise coverage,” an individual employee will be covered by the FLSA if he or she engages in interstate commerce or in the production of goods and services for interstate commerce. This can include such activities as regularly making out-of-state phone calls, receiving and sending mail or email, ordering goods from out-of-state suppliers (such as Amazon), and handling credit card transactions 

U.S. Department of Labor Resources

Compliance Resources