Changes coming to overtime eligibility requirements under the Fair Labor Standards Act

What is the Fair Labor Standards Act?
The FLSA is the set of federal laws that establish minimum wage, overtime pay requirements, employment record keeping, child labor standards and break time requirements for breastfeeding mothers. Please be mindful that there are also state laws in Indiana that cover some of these topics, so it’s important to review both when trying to determine what the law requires.

In general, the FLSA currently provides that nonexempt employees must be paid for all hours worked at a rate of at least $7.25 per hour. The FLSA also provides that nonexempt employees must be paid overtime pay at a rate of 1 ½ times their regular rate of pay after working 40 hours in any given week. The record keeping requirements applicable to the records of the nonexempt employees include identifying information about the employee, hours and days the employee worked, wages paid to the employee, including any overtime, as well as any wage deductions. There are different requirements for the records of exempt employees. The FLSA includes restrictions on hours of work for minors under 16 as well as lists of occupations deemed too hazardous for minors to work. Indiana state law actually provides more protection for employees and thus would trump the FLSA provisions related to break requirements for breastfeeding mothers.

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What does exempt/nonexempt mean?
The overtime and minimum wage provisions provided by the FLSA are applicable only to employees classified as nonexempt. Employees classified as nonexempt are eligible to enjoy the protections provided by the FLSA. Employees classified as exempt cannot benefit from – do not qualify for – the minimum wage or overtime provisions of the FLSA. They are excluded from the FLSA provisions.

How do I know if I am exempt or nonexempt?
Prior to Jan. 1, 2020, in order to be exempt from the FLSA, an employee must be paid a salary of $455 or more per week – $23,660 annually. Additionally, the person must perform duties that would be classified as executive, administrative, professional or be a computer technician, outside sales representative, or highly-compensated employee earning $100,000 or more annually. In order to be exempt, the employee’s job duties and salary must meet all of the FLSA requirements. To find out what duties qualify under the executive, administrative, professional and computer technician exemptions, see this guide.

What are the upcoming changes?
Beginning Jan. 1, 2020:

  • The salary level part of the test – the test that is used to determine if an employee is exempt or non-exempt – is changing from $455 per week to $684 or more per week – $35,568 or more annually.
  • The total annual compensation requirement for “highly-compensated employees” is changing from $100,000 per year to $107,432 per year.
  • Employers will be able to use non-discretionary bonuses and incentive payments – including commissions – paid at least annually to satisfy up to 10% of the standard salary level.
  • The special salary levels for workers in U.S. territories and the motion picture industry have been revised.

Government employers may continue to use compensatory time instead of paying overtime in the event that is the government employer’s policy. Similarly to overtime pay, comp time accrues at 1.5 hours for every hour worked over 40 by a non-exempt employee in any given work week.

When will the changes take effect?
The rule takes effect Jan. 1, 2020. Until that time, everything stays the same.

Who do I contact if I have questions about this?
The U.S. Department of Labor, Wage and Hour Division may be contacted for more information at 1-866-487-9243. The U. S. Department of Labor also has a website that explains the FLSA in more detail.

This blog article is general information and should not be construed as legal advice.  This article reflects Indiana law at the time the article was written but may not include every detail or nuance and may not reflect the law in other jurisdictions. Additionally, laws frequently change. The reader should not act on the information contained above but rather should act on the advice of his/her own legal counsel or other appropriate professional.

This blog post was written by Sylvia Watson, library law consultant and legal counsel, Indiana State Library. For more information, email Sylvia.