The Fair Labor Standards Act (FLSA) is a federal law through the Department of Labor (DOL) that establishes labor standards for public and private sector employers. The law defines a standard work week, establishes a national minimum wage and establishes parameters for working minors. In addition, the law guarantees overtime for certain positions.
The FLSA provides a set of standards to determine which jobs are covered by the act (“non-exempt”) and which jobs are not covered (“exempt”):
- Non-exempt positions are considered hourly positions and must receive overtime pay or compensatory time for hours worked over 40 in a workweek.
- Exempt positions are considered salaried positions and do not normally receive additional compensation for overtime work.
To qualify as exempt, an employee must satisfy the following three tests:
- Have a salary above the minimum salary threshold;
- Be paid on a “salary basis;” and
- Perform duties that qualify for an exemption.
On September 24, 2019, the U.S. Department of Labor announced a final rule increasing the minimum salary threshold to $684 per week, $35,568 per year for a full year worker. The new rule is effective January 1, 2020. Only employees with salaries above the threshold may be designated as exempt unless they qualify for a threshold exemption.