Tag Archives: Overtime

President Proposes Changes to FLSA Regulations

In an article yesterday, the President announced that he would be proposing changes to FLSA overtime and minimum wage exemptions. These changes, if approved will have a significant impact on many business who rely on executive or administrative exemptions to the FLSA. These exemptions permit an employer to pay a straight salary to certain employees even when those employees work more than 40 hours per week. Without these exemptions, the employer would be required to pay the employee one and one half times his regular rate of pay for each hour over 40. These proposed changes mean that fewer employees will be eligible for these exemptions.

The Law, the Rules, and the Proposed Changes

Section 213(a)(1) of the Fair Labor Standards Act (“FLSA”) provides that employees “employed in a bona fide executive, administrative, or professional capacity” are not subject to the minimum wage and overtime provisions of the FLSA. The rules defining these employees provide, among other things, that the employee must be “[c]ompensated on a salary basis at
a rate of not less than $455 per week.” 29 CFR Sections 541.100(a)(1) & 541.200(a)(1). Based upon this, employees who meet the other requirements of an executive or administrative employee, who are paid at least $23,660 a year, do not need to be paid a minimum wage nor do they need to be paid one and one half times their regular rate when they work more than 40 hours in a week.

The President plans to have this amount increased to $50,400 per year (almost $970.00 per week) in 2016. While this change will most likely affect executive, administrative, and professional employees, from a practical standpoint, this will largely affect companies using the executive and administrative exemptions.

Executive Employees
In addition to the salary requirements, to meet the executive exemption, the employee must:

  • Have a primary job duty of “management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof;”
  • “[C]ustomarily and regularly [direct] the work of two or more other employees;”
  • Have “the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.”

29 CFR Section 541.100(a).

Management activities include: “interviewing, selecting, and training of employees; setting and adjusting their rates of pay and hours of work; directing the work of employees; maintaining production or sales records for use in supervision or control; appraising employees’ productivity and efficiency for the purpose of recommending promotions or other changes in status; handling employee complaints and grievances; disciplining employees; planning the work; determining the techniques to be used; apportioning the work among the employees; determining the type of materials, supplies, machinery, equipment or tools to be used or merchandise to be bought, stocked and sold; controlling the flow and distribution of materials or merchandise and supplies; providing for the safety and security of the employees or the property; planning and controlling the budget; and monitoring or implementing legal compliance measures.” 29 CFR Section 541.102.

Administrative Employees

In addition to the salary requirements, to meet the administrative exemption, the employee’s primary job duty must be the “performance of office or non-manual work directly related to the management or general business operations” and must include “the exercise of discretion and independent judgment with respect to matters of significance.” 29 CFR Section 541.200(a). As examples of administrative employees, the CFR lists administrative assistants to business owners and executives, project leads, human resource managers, employees in the financial service industry, and insurance claims adjusters.


The President expects these rules to be in place by the end of the year. This means that employers relying on the administrative and executive exemptions to the FLSA need to closely follow these rule changes and be prepared to reevaluate their exemptions upon their passing. This is a significant, over 100%, increase in the salary threshold to meet these exceptions. As these are rule changes, not legislative changes, the approval of congress is not needed. However, there is a procedure which must be followed for any change to the CFR (outlined here).

If you have questions or concerns regarding these exemptions, the proposed rule changes, or any other employment law mater, please contact the experienced professionals at Smith & Associates for a free consultation.

FLSA and the Department of Labor Rules

Yesterday, the United States Supreme Court issued its ruling in of Perez v. Mortgage Bankers Ass’n, No. 13-1041, 2015 WL 998535, at *1 (U.S. Mar. 9, 2015). The facts leading to this case were explained by the Court as follows:

In 1999 and 2001, the Department of Labor’s Wage and Hour Division issued letters opining that mortgage-loan officers do not qualify for the administrative exemption to overtime pay requirements under the Fair Labor Standards Act of 1938. In 2004, the Department issued new regulations regarding the exemption. Respondent Mortgage Bankers Association (MBA) requested a new interpretation of the revised regulations as they applied to mortgage-loan officers, and in 2006, the Wage and Hour Division issued an opinion letter finding that mortgage-loan officers fell within the administrative exemption under the 2004 regulations. In 2010, the Department again altered its interpretation of the administrative exemption. Without notice or an opportunity for comment, the Department withdrew the 2006 opinion letter and issued an Administrator’s Interpretation concluding that mortgage-loan officers do not qualify for the administrative exemption.

Perez v. Mortgage Bankers Ass’n, No. 13-1041, 2015 WL 998535, at *9 (U.S. Mar. 9, 2015)

While the majority of the opinion revolves around a government agency’s ability to interpret its own rules, the impact to the Mortgage Bankers Association (“MBA”) is that mortgage-loan officers are now subject to the overtime provisions of the FLSA. However, as the Court points out, the MBA would have a defense to any FLSA liability that occurred before the agency reversed its interpretation.

As amended by the Portal–to–Portal Act of 1947, 29 U.S.C. § 251 et seq., the FLSA provides that “no employer shall be subject to any liability” for failing “to pay minimum wages or overtime compensation” if it demonstrates that the “act or omission complained of was in good faith in conformity with and in reliance on any written administrative regulation, order, ruling, approval, or interpretation” of the Administrator of the Department’s Wage and Hour Division, even when the guidance is later “modified or rescinded.” §§ 259(a), (b)(1).


This shows why it is important for employers to not only understand the FLSA, but the rules and interpretations promulgated by the Department of Labor. By understanding and following these rules, interpretations, and opinions, an employer reduce its potential FLSA liability. At Smith & Associates, we provide all aspects of Employment Related Legal Representation to Employers including: Compliance Review, Litigation, Appeals, Employment Contracts, Handbook and Policy Drafting, and Unemployment Appeals. If you need held with employment related law issues, contact us for a free consultation.