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5 Essential Activities to Ensure FSLA Compliance with the New Rules

by Audrey Croley Little


Some of us may remember 2019 when the last FLSA Exemption Threshold was changed.  We all went through an exercise to make the necessary adjustments to ensure we followed the law.  Starting July 1, 2024, employers must satisfy a higher salary threshold to consider employees as exempt from Fair Labor Standards Act (FLSA) overtime rules.

 

Here are the five key activities to perform to assure you comply with the new FSLA rules:

 

  1. Perform these tests to determine if a job is exempt or non-exempt under FLSA: a) Duties Test b) Salary Test

  2. Review your current exempt employees to ensure they are actually exempt under one of the tests:

 

Executive:  

  • The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;

  • The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and

  • The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees must be given particular weight.  

Administrative:

  • The employee’s primary duty must be the performance of office or non- manual work directly related to the management or general business operations of the employer or the employer’s customers; and

  • The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

 

Professional:

  • The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character, and which includes work requiring the consistent exercise of discretion and judgment;

  • The advanced knowledge must be in a field of science or learning; and

  • The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.  

To qualify for the creative professional employee exemption:

  • The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

 

Computer Exemption:

  • The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;

a)     The application of systems analysis techniques and procedures, including

consulting with users, to determine hardware, software or system functional specifications;

b)    The design, development, documentation, analysis, creation, testing or

modification of computer systems or programs, including prototypes,

based on and related to user or system design specifications;

c)    The design, documentation, testing, creation or modification of computer

programs related to machine operating systems; or

d)     A combination of the aforementioned duties, the performance of which

requires the same level of skills.

 

Outside Sales:

  To qualify for the outside sales employee exemption, all the following tests must be

met:

a) The employee’s primary duty must be making sales (as defined in the FLSA), or

obtaining orders or contracts for services or for the use of facilities for which a

consideration will be paid by the client or customer; and

b) The employee must be customarily and regularly engaged away from the

employer’s place or places of business.

 

3. Review pay structure:


The threshold has been changed to $844/weekly or $43,888/annually effective July 1, 2024.  Additionally, another threshold increase will take place January 1, 2025, to $1,128/weekly or $58,656/annually. The current threshold is $35,568/annually.

Highly compensated employees performing office or non-manual work and paid total annual compensation of $132,964 or more are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption. It then re-sets to $151,164 annually on January 1, 2025.


4.  Pay overtime accordingly:

 

If it has been determined that an employee is non-exempt, employees must be paid time and half (1.5) for all hours over 40 worked during the work week. A workweek is a fixed and regularly recurring period of 168 hours, or seven consecutive 24 hour periods.  Each workweek stands alone; averaging hours worked over two or more workweeks is not permitted by FLSA.

 

5. Consider exempt pay raises:

If the job duties are determined to be exempt, consideration should be given to raise the employee’s pay to at least the threshold; otherwise, they are non-exempt and eligible for overtime payment.

  

We’re here to help you navigate through the new rules. Reach out with any questions, we’re happy to help!

  

p.s. Here’s a handy FLSA Overtime Calculator Advisor for Nonexempt Employees


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