The following blog was originally posted on June 23, 2016, via Dean Dorton Allen Ford, PLLC.
The U.S. Department of Labor recently released its final regulations, issuing changes to Part 541, which govern certain overtime exemptions under the Fair Labor Standards Act (FLSA) for executive, administrative, professional, computer, and outside sales employees.
Under current law, certain executive, administrative, and professional employees are exempt from overtime pay if their salary is at least $455 per week ($23,660 per year) and other criteria are met regarding job roles and responsibilities. In addition to the salary requirement noted above, the respective duties for executive and administrative positions are:
- Executive: Employee’s primary duty must be managing the enterprise (or a department of the enterprise), must regularly direct the work of at least two other full-time employees, and must have the authority to hire or fire employees.
- Administrative: Employee’s primary duty must be the performance of office or other non-manual work related to management or general business of the employer and includes the exercise of discretion and independent judgment.
Effective December 1, 2016, the exemption from overtime pay for the above positions addressed in Part 541 is applicable if the employee’s salary is at least $913 per week ($47,476 per year). This amount is based on the 40th percentile of the lowest income region of the country, currently the South. Up to 10% of this salary threshold may include certain bonus or incentive payments (including commissions) that are paid at least quarterly.
This salary level will increase automatically every three years to match national wage growth. Note that the final regulations did not make any changes to the duties tests that partially determine whether a position qualifies for an overtime exemption under Part 541.
Personnel in the equine industry who meet these criteria governed by Part 541 may include trainers who train at the racetrack and back office support staff who work with racing or training operations.
Agricultural Exemption
It is important to note that the final regulations did not include any changes to the agricultural exemption addressed in Part 780. Under Part 780, employees who are engaged in agriculture are exempt from overtime pay*. For this purpose, employees engaged in the breeding, raising, and training of horses on farms are considered agricultural employees. Qualifying farm employees may include grooms, foremen, stallion managers, trainers, watchmen, and others directly involved with the care of horses on the farm. In addition to those directly involved with the care of horses, positions that are incidental to or in conjunction with the qualifying farming activities are also treated as agricultural employees. Financial staff, booking secretaries, office support and general maintenance positions that support farm operations qualify.
A significant exclusion from the agricultural designation applies to activities performed by an employee off the farm in connection with racing. A training track at the racetrack is considered off the farm. Special care should be given to track employees’ hours, if significant time is spent off the farm in this capacity.
In summary, since most personnel employed on a thoroughbred horse farm will fall under the agricultural exemption as addressed in Part 780, the newly finalized regulations may have little effect for farms. However, horse racing and training ventures that operate primarily off the farm should consider the impact of these new rules.
* Kentucky law requires overtime be paid to employees who have worked seven days in any given work week for all hours worked on the seventh day.
Contact your Dean Dorton advisor or Jen Shah at jshah@deandorton.com for more information.