Many employers wrongly believe that paying a worker a salary instead of hourly disqualifies the salaried employee from overtime.  The law may appear simple, but it can be dangerously more complex and nuanced than some may think.

From Whence Does the Salary Exemption Rule Come?

Under the federal Fair Labor Standards Act (FLSA), nearly all employees are entitled to overtime pay if they work more than 40 hours a week. Salaried workers are exempt from overtime pay if they earn more than a maximum level set by the federal Department of Labor (DOL), currently $43,888 annually.

There is a second factor:  whether a worker, regardless of annual income, is exempt from OT for “executive, administrative, and professional” duties. This factor is “squishy” and subjective. It also can produce incorrect results. The income maximum is easier to understand and apply.

How Many Are Affected?

The Biden administration’s new threshold could make four million more salaried workers eligible for overtime pay.  If an employer wants to avoid paying overtime, they must exceed the annual pay.

How Long Will the New Rule Last?

The federal courts have four legal challenges seeking to reset or eliminate the salary requirement. We don’t know if they’ll be successful. Employers claim:

• The DOL went beyond its authority, as stated in the FLSA, so their decision is illegal. Since the FLSA doesn’t mention salary levels, the DOL can’t add that to the test
• The DOL didn’t give enough weight to employers’ concerns before making the decision

The FLSA empowers the Secretary of Labor to “define and delimit” the terms of this “white collar” exemption. If the federal courts agree with employers that setting a minimum salary is too great a stretch, American workers will find themselves in a pay rate limbo, which hasn’t existed for about 80 years. It will also make these cases more complex for the DOL and employers.

Basing salary/overtime cases just on job duties creates a lot of uncertainty, as contrasted with the “bright line” salary level rule. Although employers may not want to pay employees more, just to avoid their OT rights, employers also don’t like uncertainty when calculating and planning their payroll.

After employers challenged the salary level set by the Obama administration, one federal judge stated that the US DOL lacked the authority to set a minimum pay level but later backtracked, saying the level was so high that the FLSA’s job duties test was irrelevant. In a 2023 case involving overtime pay, three of the nine justices on the US Supreme Court stated in dissenting opinions the DOL lacks authority under the FLSA to include pay level as part of the salary test.

Unless and until a court stops the rule, it continues to apply to America’s salaried workers and may give millions of them pay raises.

Has Your Employer Stolen Your Pay?

If you have questions about being misclassified as a salaried employee and the pay you may be missing, or you believe you have a legal claim, we will listen to your facts, explain the law, and suggest right and reasonable approaches for relief.

Kingston Law Group provides compassionate counsel and tough advocacy. We are ready to help you, your loved ones, and friends. Call us at +1-609-683-7400 or contact us online to schedule a near-term initial consultation at a reduced hourly rate. Call today. You’ll be glad you did.