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In recent years, wage and hour settlements have cost U.S. companies in excess of one billion dollars a year. With a new regulation of the Fair Labor Standards Act (FLSA) going into effect on January 1, 2020, it is important for employers to review the changes, and take measures to avoid costly misclassification of employees.

Who Is Covered by FLSA?

The FLSA covers “enterprises” whose annual sales total at least $500,000; or are engaged in interstate commerce. HKQ Law employment Attorney Lars Anderson notes that “the term ‘interstate commerce’ has been interpreted very broadly by the courts.” (For example, companies that regularly use the U.S. mail to send or receive letters to and from other states are viewed as engaging in interstate commerce.) Even if the business fails to meet the criteria of the “enterprise coverage test”, individual coverage still applies to any employee whose work involves interstate commerce. Certain institutions such as hospitals, nursing homes, and schools are also under the auspices of FLSA.

What Are the FLSA’s Overtime Requirements?

Under FLSA overtime eligible employees are required to receive 1-1/2 times their regular rate of pay for all hours worked in excess of 40 in a given work week. There are, however, some employees who are exempt from the overtime regulations. In order to be classified as overtime exempt the employee must meet the requirements of the specific exemption. FLSA sets forth a two-prong test: (1) the employee must meet a salary level threshold, and (2) the employee’s duties must coincide with the exemption classification.

Common exemptions under FLSA include:

• Executive, administrative, and professional (EAP) employees
• Commissioned sales employees
• Computer professionals
• Seasonal and recreational establishments
• Farmworkers

What Changes on January 1, 2020?

The new regulation:

• raises the “standard salary level” from the currently enforced level of $455 per week to $684 per week (equivalent to $35,568 per year for a full-year worker);
• raises the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year of which $684 must be paid weekly on a salary or fee basis;
• allows employers to use non-discretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level; and
• revises the special salary levels for workers in U.S. territories and the motion picture industry.

What Stays the Same?

The “duties tests”, which require that employees meet certain duties requirements in order to be exempt from overtime, have not changed.

For the executive exemption:

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

For the administrative exemption:

• 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.

The term “business operations” includes but is not limited to working in the following areas: tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; procurement; advertising; marketing; research; safety and health; personnel management; human resources; employee benefits; labor relations; public relations, government relations; computer network, internet and database administration; legal and regulatory compliance; and similar activities.

There are two classifications under the professional exemption: learned professional and creative professional.

For the learned professional exemption:

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

For the creative professional 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.

For the highly compensated exemption:

• The employee’s primary duty includes performing office or non-manual work; and
• The employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional employee.

Non-management production line workers and employees who perform work involving repetitive operations with their hands, physical skill, and energy are not exempt under this section no matter how highly paid.

When Do State Overtime Regulations Come Into Play?

Most states have their own overtime regulations. A state can provide workers with more rights and benefits than offered by the FLSA, but not less.

When the state and federal regulations conflict, the regulation most favorable to the employee prevails. For example, in Pennsylvania, computer employees are not considered exempt as they are under FLSA. As a result these employees are typically entitled to overtime. Another difference between Pennsylvania and FLSA regulations is that Pennsylvania does not allow the use of the fluctuating workweek method of paying overtime to salaried workers whose workweek fluctuates above and below 40 hours per week.

How Can Businesses Prepare?

There are a number of steps an employer can take to prepare for the new regulation, and avoid costly mistakes.

1. Analyze the situation.

Examine each employee’s compensation and job duties and responsibilities to make sure that employees are properly classified as overtime eligible or overtime exempt. Be mindful of how the new regulation may affect an employee’s current classification.

2. Make necessary changes.

The new FLSA overtime regulation may necessitate that you either reclassify an employee as nonexempt, or raise his or her salary to meet the new threshold. Determine the most cost-effective classification based on the employee's typical work hours.

3. Discuss the changes.

If an employee who was previously classified as overtime exempt is reclassified as overtime eligible have a discussion with the employee to ensure that he or she understands what the change means with regard to their hours of work and/or compensation.

4. Track hours accurately.

It is especially critical that the hours salaried employees who do not qualify as overtime exempt are accurately tracked to ensure overtime compensation is paid when appropriate.

If you have any questions about how the new overtime regulation effects your business, call HKQ Law at (800) 760-1529 to speak with an employment law attorney.

About HKQ Law

Hourigan, Kluger & Quinn is considered one of the top civil litigation and commercial law firms that has had the privilege of representing more families in the courtroom than any other NEPA firm. The attorneys at HKQ Law have been honored as Super Lawyers, Best Lawyers, Best Law Firms by US News and World Report, and have received the AV Preeminent Rating by Martindale-Hubbel. HKQ Law was recently recognized for one of the top 20 Verdicts in Pennsylvania.

The firm’s Personal Injury Team, led by Attorney Joe Quinn, Jr., has won some of the largest verdicts and settlements in the region's history. The Personal Injury Team focuses on a wide array of personal injury claims and civil litigation, including medical malpractice, auto and truck accidents, aviation accidents, unsafe vehicles, dangerous or defective products, workplace injuries (worker's compensation), construction site accidents, claim denials by insurance companies, dangerous drugs, defective children's products, nursing home abuse and neglect, and falls due to unsafe conditions (slip and fall).

Attorney Joseph A Quinn, Jr. is one of only 100 attorneys in the United States (and one of only three in Pennsylvania) honored with membership in the Inner Circle of Trial Advocates, and one of only 500 attorneys worldwide chosen to be a Fellow of the International Academy of Trial Lawyers. He has been a Pennsylvania Super Lawyer every year since the program began and has been listed in The Best Lawyers in America every year since the publication was established in 1987. Best Lawyers also named him top personal injury attorney for Northeastern Pennsylvania and the Lehigh Valley. In addition, Best Lawyers, in conjunction with U.S. News & World Report, has designated HKQ a Tier 1 Best Law Firm across multiple categories in Northeastern Pennsylvania and the Lehigh Valley.

Since the inception of the firm, the Commercial / Corporate Team led by Attorney Allan Kluger has provided comprehensive, integrated legal services to many of Northeastern and Eastern Pennsylvania's largest corporations, businesses, banks, non-profits and institutions, handling matters involving labor and employment, wills, trusts and estate planning, estate administration, elder law, commercial transactions, residential and commercial real estate, zoning, land use and development, telecommunications, mediations and arbitrations, commercial litigation, title insurance, business planning and business succession, corporate/business structuring, employment discrimination law for employers, banking, creditor’s rights, finance, lender liability defense, covenants not to compete, construction law, mergers and acquisitions and other business matters.

Additional information can be found at or by calling (800) 760-1529.



As Hourigan, Kluger and Quinn addresses the concerns raised by COVID-19, the health and safety of our clients, employees and friends of the firm remain our top priority.

These are very difficult and scary times and we hope that you and your loved ones are safe and symptom free. We recognize that so many of you are understandably anxious about your health, the economic impact of this pandemic and all of the consequences of social isolation.

We also recognize that many of you are anxious about how the coronavirus is impacting the Court systems, our firm and your cases. Although all of our offices are closed, our firm has remained fully operational and we have initiated procedures that allow all of our attorneys and staff to work remotely from their homes. Each of us and our staff will respond to any emails and calls about your cases as quickly as possible.

Our Federal and State Courts have instituted significant changes in their calendars as a result of the coronavirus. Although most courthouses are closed to the public, and Hearings and Trials will be delayed for some time, there are matters that can proceed telephonically and by video. Despite these changes in the Court calendars, we are working diligently on your cases and are determined to do whatever we possibly can to assure an early and just recovery for you and your loved ones. Even under these difficult circumstances, we believe that "Nobody will work harder for you than we will."

With regard to new potential clients, we are not in a position to have an in-person new client meeting, but we will be conducting these initial meetings via phone. New potential clients should call us for a free telephone consultation at (570) 287-3000.


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