New FLSA Overtime Pay Rule Could Affect Some Managers at Health Clubs

More American workers will be eligible for overtime pay under a new rule finalized by the U.S. Department of Labor (DOL) on Wednesday.

The new rule, which becomes effective Dec. 1, will extend overtime protections to an additional 4.2 million Americans currently ineligible for the protections under federal law, according to a media release issued by the White House.

The rule revises regulations under the Fair Labor Standards Act of 1938 (FLSA) and implements a higher threshold at which executive, administrative, professional, outside sales and computer employees are exempt from overtime. These exemptions are sometimes referred to as "EAP" or "white collar" exemptions.

The FLSA revision comes two years after President Barack Obama signed a memo directing the Department of Labor to modernize the country's overtime rules.

The new rule will:

  • Raise the overtime exemption salary threshold from $23,660 to $47,476 a year, or from $455 to $913 per week.
  • Update the salary threshold every three years.
  • Raise the "highly compensated employee" threshold – from $100,000 to $134,004 – above which only a minimal showing is needed to demonstrate an employee is not eligible for overtime.
  • Respond to employers' concerns by making no changes to the "duties test" and allowing bonuses and incentive payments to count toward up to 10 percent of the new salary level.

The rule was developed with input from 270,000 public comments and outreach meetings with employers, business associations, small business, workers, worker advocates, non-profit organizations, educational institutions, and state and local government representatives, according to the White House.

Kara Maciel, the labor chair of Conn Maciel Carey PLLC's Employment Practice Group, shared insights on the rules' potential impact on the health club business in April's free Club Industry webinar.

Maciel noted that many low-level managers and assistant managers may automatically be disqualified from exempt status unless their salaries are increased to meet the new salary threshold. This could lead to significant increases in labor costs for a health club business, Maciel said.

To prepare for the rule, which was a proposal in April, Maciel said clubs should:

  • Audit the exempt classifications of the current workforce to ensure they meet the current requirements;
  • Pay special attention to those who are close to the salary threshold and those who hold "assistant manager" or "supervisor" type positions;
  • Review policies regarding overtime and hourly tracking systems as a result of the increased number of employees who will be entitled to overtime.

The proposed changes to the FLSA exemptions were not the only topic Maciel covered. She discussed trending state paid sick and family leave laws, and the increase in federal litigation in wage and hour lawsuits. The misclassification of trainers, working off the clock and not paying for all hours worked were among the topics covered in the wage and hour mistakes portion of the webinar.