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The Latest Developments on Overtime Pay

Nov. 23, 2016 – New overtime rules enacted by the Department of Labor (DOL) had been scheduled to go into effect on Dec. 1, 2016, which raised the salary threshold for which overtime pay was required for covered employees from $23,660 to $47,476 per year.

However, on Nov. 22, 2016, a federal judge in Texas granted a preliminary injunction on a nationwide basis which suspends the new overtime regulations from going into effect until the judge can issue a ruling on the merits. Specifically, the judge found that the plaintiffs in the case, 21 states and the U.S. Chamber of Commerce, had made out a prima facie showing that the DOL’s “salary level and automatic updating mechanism are without statutory authority.”

This means that no change to the overtime law will take place on Dec. 1, or thereafter until the judge issues a further ruling. Either side may also appeal the ruling to a federal appeal court or, potentially, to the U.S. Supreme Court.

Below is information on the regulations as they had been scheduled to go into effect:

Coverage under the Fair Labor Standards Act (“FLSA”) may happen in one of two ways: (1) the organization as whole may be a covered enterprise; or (2) a particular worker(s) within the organization may be individually covered.

Most churches will not be covered enterprises, as that requires that they engage in ordinary commercial activities that result in sales made or business done of at least $500,000 annually. As the DOL puts it, “[a]ctivities that are charitable in nature, however, are not considered ordinary commercial activities, and do not establish enterprise coverage.”

Organizations that are not covered under the FLSA are still likely to have some employees who are covered individually. Coverage is based on the employee’s work activities. An employee who engages in interstate commerce on a substantial basis is covered by the FLSA. Examples of interstate commerce activities shared by the Department of Labor include:

  • Making out-of-state phone calls;
  • Receiving or sending mail or electronic communication interstate;
  • Ordering or receiving goods from an out-of-state supplier; and
  • Handling credit card transactions or performing accounting/bookkeeping for such activities.

Individual employees covered by the FLSA will be subject to the overtime pay requirements unless they are exempt from them. The basic exemptions are for executive, administrative or professional employees, and are sometimes referred to as the “white collar” exemptions. Among the requirements for each exemption is a job duties test:

  • Executive employees’ primary duty must be managing the enterprise – or managing a recognized department or subdivision of the enterprise – and managing at least two full-time employees.
  • Administrative employees’ primary duty must be the performance of office or non-manual work directly related to the general business operations of the employer. The primary duty must include exercise of discretion and independent judgment with respect to matters of significance and the employee’s primary duty
  • Professional employees’ primary duty must be to perform work that either requires advanced knowledge in a field of science or learning or that requires invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

If a covered employee does not meet one of these tests, he or she must be paid for overtime work under the FLSA. If a covered employee meets one of these tests, he or she must still be paid the minimum salary threshold under the FLSA. Currently, that threshold is $455 per week, or $23,660 per year. Under the proposed regulations, that threshold had been scheduled to increase to $913 per week, or $47,476 per year, in order to be exempt from overtime pay.

The situation regarding the overtime regulations is fluid and subject to change. It is a good idea to consult with your organization’s financial and/or legal advisors to discuss your organization’s situation. For more information on the overtime rules as they had been proposed, check out the DOL’s publication “Guidance for Non-Profit Organizations on Paying Overtime under the Fair Labor Standards Act”.

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