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Policy Watch - Wage & Hour

The Fair Labor Standards Act (FLSA) of 1938 and the Family and Medical Leave Act (FMLA) of 1993 are the two primary federal statutes shaping workplace policies in this country. The U.S. Department of Labor’s (DOL) Wage and Hour Office enforces both FLSA and FMLA. Among other things, FLSA establishes the minimum wage, overtime pay and recordkeeping requirements for employees in the private sector and in federal, state and local governments. Under FLSA, employees are to be paid at a rate of at least one and one-half times their regular rate for any hours worked in excess of 40 in one week, unless they have been classified as exempt under certain specific statutory categories or meet other requirements outlined in the regulations.

Under Section 541 of FLSA regulations, an employee may qualify as exempt from overtime requirements if he or she satisfies a “primary duties test” (performs specific job responsibilities under the executive, administrative, professional, computer and outside sales regulations), is paid on a salary basis (that is, salary does not fluctuate based on the hours that the individual works) and is paid above a salary threshold set by regulation. Under the current regulations, employees must be paid more than $455 per week ($23,660 per year) to satisfy the salary threshold for exemption. On May 18, 2016, DOL issued final overtime regulations that increase the salary threshold to $913 per week, or $47,476 annually, increase the highly compensated employee level and impose automatic updates to the salary threshold every three years. 

In late November, a federal court issued a preliminary injunction preventing the rule from becoming effective on December 1, 2016, as originally scheduled, until the court issues a final determination. In issuing the preliminary injunction, the court determined that those challenging the rule—21 states and more than 50 employer groups—stood a significant chance of success and faced a substantial threat of irreparable harm if the rule was not halted. As a result, employers are holding off on implementing changes, and some that complied with the rule ahead of schedule are rolling back changes until the issue is resolved. Although DOL has since appealed the injunction, most observers believe it is more likely that the fate of any overtime salary threshold increase will now be in the hands of the Trump Administration.

In addition to FLSA, FMLA and the Federal Employees Flexible and Compressed Work Schedules Act of 1985 are federal statutes that generally shape workplace flexibility policies. Certain states, including Arizona, California, Connecticut, Massachusetts, New Jersey, New York, Oregon, Rhode Island, Vermont, and Washington, have enacted statewide paid leave insurance programs and/or mandated paid leave statutes.


Current Issues

The following specific issues are of particular concern to human resource executives and the organizations they serve:

  • Overtime RegulationsOn November 22, 2016, U.S. District Court Judge Mazzant issued a temporary nationwide injunction of the Obama Administration’s overtime rule changes in response to a legal challenge brought by 21 states and a coalition of employer groups. The practical effect of this injunction is to preserve the rules that employers currently use to determine which employees are exempt from overtime under FLSA and which are not. 
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  • Workplace FlexibilityWorkplace flexibility is a strategic business practice that determines when and how work is to be done. It helps organizations create a modern work environment that is responsive to demographic, economic and technological changes.
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