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Thursday, December 1, 2016

Overtime-Pay Final Rule’s Salary Level Test

UPDATE: On September 22, 2016, a U.S. District Court judge in Texas granted an Emergency Motion for Preliminary Injunction and enjoined the U.S. Department of Labor from implementing and enforcing the Federal Overtime Final Rule that was scheduled to go into effect on December 1, 2016. In general, the Fair Labor Standards Act (FLSA) requires payment of a minimum wage for all hours worked during the workweek plus overtime pay of not less than one and one-half times the employee’s regular rate of pay for hours worked over 40 hours in a workweek. The FLSA provides a number of exemption from the overtime pay requirement for executive, administrative, professional and computer employees (the “white collar” or “EAP”exemption). In order to be exempt from the overtime payment requirement, generally, three tests must be satisfied: (1) the Salary Level Test, (2) the Salary Basis Test and (3) the Duties Test. onaldDMoy@DrLaw.com

* The Federal Overtime Final Rule would have increased the salary threshold under the Salary Level Test from $455 per week ($23,600/yr.) to $913 per week ($47,476/yr.). The U.S. Department of Labor estimated that the increase in the Salary Level Test would have extended overtime payment eligibility to millions of more workers nationwide. While the Federal Court ruling, at least for now, will block implementation of the Federal Overtime Final Rule, employers in NYS need to be aware that the NYS Department of Labor has adopted a rule that will increase the Salary Level test in NYS. NYS Department of Labor regulations, in general, incorporate the FLSA requirements for overtime pay, including the FLSA exemptions based upon the Salary Level, Salary Basis and Duties tests. NY Codes Rules and Regulations, 12 N.Y.C.R.R. section 142-2.2.

On December 28, 2016, however, the NYS Department of Labor adopted a rule that raises the Salary Level Test for Executive and Administrative employees. The new requirements will go into effect on December 31, 2016. The revised Salary Threshold in NYS varies by geographical area and size of the employer, as follows:

1. Large employers of eleven or more employees (NYC)

$ 825.00 per week ($42, 900/yr.) on and after 12/31/16 $975.00 per week ( $50,700/yr.) on and after 12/31/17 $1,125.00 per week ( $58,500/yr.) on and after 12/31/18

Small employers of ten of fewer employees (NYC)

$ 787.50 per week ($40,950/yr.) on and after 12/31/16 $900 per week ( $46, 800/yr.) on and after 12/31/17
$1, 012.50 per week ($52,650/yr.) on and after 12/31/18 $1,125.00 per week ( ($58,500/yr.) on and after 12/31/19

2. Remainder of downstate- Nassau, Suffolk and Westchester counties

$750.00 per week ($39,000/yr.) on and after 12/31/16 $825.00 per week ( $42,900/yr.) on and after 12/31/17 $900.00 per week ($46,800/yr.) on and after 12/31/18 $975.00 per week ( $50,700/yr.) on and after 12/31/19 $1,050.00 per week ( $54,600/yr.) on and after 12/31/20 $1,125.00 per week ( $58,500/yr.) on and After 12/31/21

3. Remainder of NYS (outside of NYC, Nassau, Suffolk and Westchester)

$727.50 per week ($37,830/yr.) on and after 12/31/16 $780.00 per week ( $40,560/yr.) on and after 12/31/17 $832.00 per week ( $43,264/yr.) on and after 12/31/18 $885.00 per week ($46,020/yr.) on and after 12/31/19 $937.50 per week ( $48,750/yr.) on and after 12/31/20

Lessons Learned

While NYS employers, at this time, are not required to increase exempt employees’ salary to the $913 per week salary threshold as required under the Federal Overtime Final Rule, NYS employers are required to meet the salary threshold as required under the NYS Department of Labor regulations. Thus, the salary threshold under the Salary Level Test in NYS is higher than the current salary threshold under the federal regulations. Employers with workplaces in multiple locations in NYS must be aware of the different salary thresholds depending upon the employees’ location within the state.

Reminder: Minimum Wage Payment Requirement in NYS

Legislation was enacted as part of the 2016-17 state budget that will phase in a $15 per hour minimum wage, as follows:

NYC (employers with at least 11 employees): The minimum wage increases to $11 per hour on December 31, 2016, then an additional $2 per hour each year after, reaching $15 per hour on 12/31/18

NYC (employers with 10 or fewer employees): The minimum wage increases to $10.50 per hour on December 31, 2016, then an additional $1.50 per hour each year after, reaching $15 per hour on 12/31/19

Nassau, Suffolk, and Westchester County: The minimum wage increases to $10 per hour on December 31, 2016, then an additional $1 per hour each year after, reaching $15 per hour on 12/31/21

Rest of NYS: The minimum wage increases to $9.70 per hour on December 31, 2016, then an additional 70¢ per hour each year after, reaching $12.50 per hour on 12/31/20.

After that date, the minimum wage will continue to increase to $15 per hour on an indexed schedule to be set by the Director of the Division of the Budget in consultation with the NYS Department of Labor.


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