Government Employees Overtime Rules White Paper

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Rule Exempt Employee

The Final Rule that was announced and published on May 18, 2016, seeks to update the overtime regulations applicable in the U.S. This rule is expected to provide overtime pay protections for over 4 million workers in the first year of its implementation. It is expected that many workers in the U.S. would get a boost to their wallets and seek to ensure that the adequate compensation is given to people for their hard work.

The new rule seeks to cover a number of primary issues that include the updating of the salary and the compensation levels for Executives, Administrative and Professional workers to be exempted. The rule that was announced "sets the standard salary level for workers at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region" (Colunga & Atterberry, 2015). This region is currently the South where the pay is $913 per week and $47,476 annually for a full-year worker.

The rule also sets the annual compensation of highly compensated employees (HCE) and is subject to "a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004)" (Colunga & Atterberry, 2015).

The rule also provides for the formation of a mechanism for the automatic update of the salary and the compensation levels set at every three years. The aim is to maintain the levels "at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption" (Kastrinsky, 2014).

But for salaried employees, the rule, more importantly, sets the rule for "determining whether white collar salaried employees are exempt from the Fair Labor Standards Act's minimum wage and overtime pay protections" (Colunga & Atterberry, 2016). According to the rule, such employees are exempt when they are employed in a capacity that includes being an executive, administrative or professional capacity according to the definition as is applicable and defined in the Department of Labor's regulations at 29 CFR part 541. This is often referred to as the EAP exemption or the "white collar" exemption (Colunga & Atterberry, 2016).

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Determination of employees about whether they fall within the category of exemption and the white collar exemptions is also defined by the Final Rule. The requirements for an employee to be exempt include the necessity for the employee to be salaried which means that an individual has to be paid a predetermined salary that is fixed and is not subject to any form of reduction due to variations in the quality or the quantity of work that is performed. For an employee to be exempt from overtime, he or she must also be paid a salary that is more than a specified weekly salary level. The Final Rule has fixed the minimum salary of $913 per week which is equivalent to $47,476 annually for a worker working for a full-year. This is the salary test according to the Final Rule (Colunga & Atterberry, 2015).

The duties test also requires to be performed on the employees being discussed to be exempt and it is necessary whether an individual performs an executive, administrative or professional duty which is defined according to the Department's regulations. However, a section of salaried employees is 'automatically exempt from the Final Rule exemptions requirements and include salaried professionals working in the field of medicines like doctors, teaching and lawyers for example Exemptions Under the Fair Labor Standards Act (FLSA). Additionally according to the Final Rule, those employees who are highly paid or compensated -- referred to as highly compensated employees ("HCE"), and who earn more than the higher total annual compensation level of $134,004 under this Final Rule and also satisfy a minimal duties….....

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