The Fair Labor Standards Act (FLSA), enacted in 1938, is the main federal law that establishes general wage and hour standards for most, but not all, private and public sector employees. Among other protections, the FLSA establishes that covered nonexempt employees must be compensated at one-and-a-half times their regular rate of pay for each hour worked over 40 hours in a workweek.
The FLSA also establishes certain exemptions from its general labor market standards. One of the major exemptions to the overtime provisions in the FLSA is for bona fide “executive, administrative, and professional” employees (the “EAP” or “white collar” exemptions). The FLSA grants authority to the Secretary of Labor to define and delimit the EAP exemption “from time to time.” To qualify for this exemption from the FLSA’s overtime pay requirement, an employee must be salaried (the “salary basis” test); perform specified executive, administrative, or professional duties (the “duties” test); and earn above an established salary level threshold (the “salary level” test).
In September 2019, the Secretary of Labor published a final rule to make changes to the EAP exemptions. The 2019 final rule is effective on January 1, 2020. The major change made by the 2019 final rule is increasing the standard salary level threshold for the salary test from the previous level of $455 per week to $684 per week. The 2019 final rule does not change the duties and responsibilities that employees must perform to be exempt. Thus, the 2019 final rule would mostly affect EAP employees at salary levels between $455 and $684 per week in 2020. The Department of Labor (DOL) estimates that about 5.4 million workers would be affected in the first year, including about 1.3 million EAP employees who would become newly entitled to overtime pay and an additional 4.1 million workers who would have overtime protection clarified and thereby strengthened.
This report answers frequently asked questions about the overtime provisions of the FLSA, the EAP exemptions, and the 2019 final rule that defines and delimits the EAP exemptions.