The Fair Labor Standards Act is a federal law originally enacted in 1938 to provide certain protections to American workers. Most people are familiar with the FLSA’s minimum wage provisions, which came under heavy scrutiny during the two terms served by former President Barack Obama. The federal minimum wage can be superseded by higher minimum wage laws enacted at the state level, but one FLSA provision that is uniform across the United States deals with salaried employees.
In essence, the FLSA prevents certain unfair practices related to overtime pay and who can be exempt from it. The full FLSA can be found in the United States Code, Section 29, Chapter 8, but the specific part of the law that applies to salaried employees is covered by subsection 203.
Overtime pay is defined as the obligation that employers towards employees who work more than 40 hours a week or more than eight hours a day. These are employees who are paid on an hourly basis and have to “punch the clock;” should they be required to work more than eight hours in a single day, they have to be paid at the time and a half rate. Let’s say a sales clerk at a boutique is paid $10 an hour; if she has to work 10 hours in a day because of high sales volume during the holidays, she will have be to be compensated at $15 per hour for the two overtime hours she put in, which means that she will make a total of $110 on that day.
In FLSA and payroll terms, the boutique sales clerk in the example above is a non-exempt employee because she meets the following criteria:
* She is not a company executive.
* She does not have administrative duties.
* She is not a licensed professional.
* She makes less than $913 per week.
* She makes less than $47,476 per year.
Salaried employees, on the other hand, are exempt from the FLSA because they meet the criteria listed above. Exempt workers are on payroll, but they do not have to punch the clock because they are not paid by the hour. They will not receive overtime pay even if they work more than eight hours per day or 40 hours per week. Salaried workers are often hired as managers or supervisors who are expected take on administrative roles, and which may call upon them to work on weekends or more than eight hours a day.
Prior to May 2016, the salary threshold for exempt employees started at $23,660 per year, which works out to just $455 per week. The problem with this low threshold is that unscrupulous employers took advantage of it by giving administration duties to production and blue collar workers; by doing so, they could make them work long hours without having to pay overtime, thereby increasing productivity and saving on payroll.
Exempt American workers who are currently on salaries could become non-exempt in the future as the minimum threshold increases every three years; the next increase is expected to take place in early 2020.