As reported in the June 2016 edition of the Extra Mile, the U.S. Department of Labor (“DOL”) recently released rules under the federal Fair Labor Standards Act (“FLSA”) updating the salary and compensation levels for overtime pay exemptions for executive, administrative, professional, computer, and highly compensated employees (commonly referred to as the “white-collar exemption”). The new rules become effective on December 1, 2016.
The FLSA requires that employees receive overtime pay for hours worked over forty hours each workweek. The white-collar exemption excludes employees in a “bona fide executive, administrative, and professional capacity” from this requirement. In determining whether an employee qualifies for the white-collar exemption, the DOL provides a salary test. The DOL’s most-recent rules nearly doubled the standard salary needed to qualify for the white-collar exemptions from $455 per week ($23,660 per year) to $913 per week ($47,476 per year).
On September 20, 2016, 21 states and more than 50 business organizations filed suit in federal court challenging these new rules. The states claim the new rules will increase costs, forcing them to reduce or eliminate government services. The states ask the court to find that the new rules violate the Tenth Amendment (which reserves powers not granted to the federal government for the states), arguing that the rules infringe on states’ authority to dictate wages paid to state employees.
In addition, both the states and the business organizations claim the DOL exceeded its authority in raising the salary standards. They argue that, in enacting the FLSA, Congress did not intend that an employee’s salary would determine overtime-eligible employees and exempt white-collar workers, effectively failing to exempt “bona fide executive, administrative, or professional” employees whose salaries fall below the threshold.
HLERK will continue to monitor these cases and update our clients on significant developments. In the meantime, employers should review their current positions and determine whether exempt positions may no longer be exempt from overtime pay requirements under the new rules. Employers should also refer to the Illinois Minimum Wage Law, which adopts the FLSA’s salary thresholds but provides different duties an employee must perform to qualify as exempt.