Under the federal Fair Labor Standards Act (“FLSA”), most employees are entitled to receive overtime compensation (1.5 times their regular rate of pay) for all hours they work above 40 hours in a workweek. However, the FLSA also exempts certain executive, administrative and professional employees who are paid on a salaried basis and make at least $455 per week. President Obama announced last week that he is directing the U.S. Department of Labor (the agency charged with enforcing the FLSA) to amend its regulations to raise that salary threshold.
The legal effect of this change is that employers will have to begin paying overtime compensation to some of their employees who would otherwise be exempt from the overtime pay requirement. For example, a store manager of a restaurant earning a $25,000 salary who is exempt under the current regulations would no longer be exempt under the new regulations. The employer will either have to reconfigure the job duties or pay structure of the job, or it will have to determine what that employee’s regular rate of pay is (which will vary from week to week, depending on the number of hours the employee actually works) and then pay that employee additional compensation based on that regular rate, above and beyond the agreed-upon salary, for every hour worked above 40.