Changes in Fair Labor Standards Act (FLSA) Rules – Big Impacts

Friday, March 21, 2014

 

It should come as no surprise to anyone that a change in the Fair Labor Standards Act (FLSA) guidelines would have a significant impact on many organizations.  Just consider the current minimum earnings standard of $455 per week that is used to classify workers as non-exempt vs. exempt.  If that standard were raised to the proposed level of $970 per week or $24.25 per hour, millions of workers could be impacted by being reclassified from exempt to non-exempt.  This would then expose millions of additional primarily while-collar employees to FLSA’s overtime rules.  Such a change could impact workers in job classifications ranging from Animal Care Workers to Meeting and Event Planners.

 

A second proposed change is to the "primary duties" test.  Workers who are currently classified as exempt due to their job duties could be reclassified as non-exempt not because their duties changed rather due to a change in the rules making it difficult for employers classify them as exempt.  Workers are often classified as exempt based on the primary duties of their roles, this includes classifications such as:  Executive, Administrative, Professional, Computer-Related Occupations, and Outside Sales Employees.  The key to classifying these roles as exempt is found within the primary duties rules.

 Executive Employees

Compensated on a salary basis not less than $455 per week

Primary duty must be managing the enterprise, a department
or subdivision

Must regularly direct the work of at least two or more full-time
employees

Must have authority to hire/fire other employees

 

Administrative Employees

Compensated on a salary basis not less than $455 per week

Primary duty must be the performance of office or non-manual work

Primary duty includes exercise of discretion and independent judgment

 

Professional Employees

Learned professional employee

Compensated on a salary basis not less than $455 per week

Primary duty must be work requiring advanced knowledge

Advanced knowledge must be in a field of science or learning

Knowledge must be acquired by prolonged course of instruction

 

Creative professional employee

Compensated on a salary basis not less than $455 per week

Primary duty must require invention, imagination, originality
or talent in artistic/creative endeavor

 

Employees in Computer-Related Occupations

Compensated on a salary basis not less than $455 per week

Compensated hourly, at a rate not less than $27.63 an hour

Employed as computer systems analyst, computer programmer,
software engineer or other similarly skilled worker in the computer
field

Primary duty must consist of:

Application of systems analysis, consulting, determination of
hardware, software or system specifications;

Design, development, documentation, analysis, creation,
testing or modification of computer systems

Design, documentation, testing, creation or modification of
computer programs

Outside Sales Employees

Primary duty must be making sales

Obtaining orders or contracts for services

Use of facilities for which a consideration will be paid

Must be customarily and regularly engaged away from
the employer’s place or places of business.

Is clear, that any change to the earnings threshold and/or the primary duties test could have far reaching impacts for any organization regulated under the Fair Labor Standards Act (FLSA).