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Posted on Blog July 22, 2015
Manager. The title often comes with more responsibility and more working hours. However, managers do not receive the same overtime compensation as their hourly subordinates. Section 13(a)(1) of the Fair Labor Standards Act contains the well-known and often used exemption to the requirement to pay employees overtime for hours they work in excess of 40 per week. In order for the exemption to apply, three test must be met: 1) The employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed; (2) the amount of salary paid must meet a minimum specified amount; and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations.
It has been long recognized that the amount of salary paid or the salary level, is the most important test. Under the current regulations, executive, administrative or professional employees who are paid at least $455 per week or $23,660 per year can qualify for the exemption. Under the direction of President Obama, the Department of Labor researched the salary threshold and proposed adjustments to the regulations on July 6, 2015. The Proposed Rule increases the minimum threshold for the exemption from to $50,440.00 per year, nearly doubling it from its prior level. The Proposed Rule is open for public comment through September 4, 2015. If accepted, the Proposed Rule could mean major changes for the manner in which nearly 5 million employees are compensated.
If you are a business with management employees falling below the $50,440.00 threshold, you want to keep an eye on the Proposed Rule.
This blog does not address highly compensated employees.