The United States Department of Labor updated its regulations governing the exemption of executive, administrative and professional employees (EAP) employees from the minimum wage and overtime pay protections of the Fair Labor Standards Act. The Fair Labor Standards Act ensures minimum pay and overtime protection for most employees, but the executive, administrative and professional employees are exempt from those protections. The updated regulations changed the salary and compensation levels needed for the EAP workers to be exempt.
Generally, there are three tests that must be met for the Fair Labor Standards Act’s EAP exemption to apply. The tests are a salary basis test, salary level test and a duties test. The updated rule focuses on the salary level test which sets the minimum salary level at $913 per week or $47,476 annually for a full-year worker. Now, a full-time EAP employee must make $47,476 or more to be exempt under the Fair Labor Standards Act. If a full-time EAP employee makes less than $47,476, they are subject to overtime pay. This compensation amount is updated every three years automatically so employers must review the new rules for changes to the salary level.
The new rule goes into effect December 1, 2016. All employers should review their EAP employees to determine if some of their employees will become subject to overtime compensation. You can go to the Department of Labor’s website (www.dol.gov) for additional information on the updated regulations.
By Marilyn Mays, CPA, CGMA