Updated: Jul 23, 2020
By Sarah Everhart
The federal Fair Labor Standards Act (FLSA) requires most employees to be paid at least the federal minimum wage and overtime pay (time and one-half the regular rate of pay) for all hours worked over 40 hours in a workweek unless exempted from the law. Exemptions include employees who work in agriculture (as defined by the FLSA) and executive, administrative, and professional employees (the “white collar” employee exemption) who meet the U.S. Department of Labor (DOL) duties test and are paid a salary of at least $455 per week, or $23,660 per year. It is important to note that the FLSA provides minimum standards, and does not preempt a state from establishing more protective standards. For example, Maryland requires employers to pay agricultural employees overtime pay for all work over 60 hours per week. On May 18, 2016, President Obama announced the DOL was publishing a new federal regulation updating some aspects of the FLSA pertaining to overtime, including the white collar employee exemption.
The new regulation, which becomes effective December 1, 2016, does not affect the agricultural labor exemption. However, employers need to be cautious when apply the agricultural labor exemption. According to the DOL, a common employer mistake is failing to pay overtime to employees whose jobs are related to agriculture but do not meet the FLSA’s definition of agriculture. To determine whether farm employees are eligible for the agricultural labor exemption, an employer must compare the work performed by the employee to the FLSA’s definition of agriculture, broken down into either primary or secondary agriculture. Primary agriculture includes cultivation and tilling of soil; production, cultivation, growing, and harvesting agricultural and horticultural commodities; and raising of livestock, bees, fur-bearing animals, or poultry. Secondary agriculture includes any practices performed by a farmer or on a farm as an incident to or in conjunction with farming operations, including preparation for market, delivery to storage or to market or to carriers for transportation to market. Work not qualifying as agricultural labor includes the sale of products produced by another farmer such as sales at an on-farm market or creamery and/or work for an independent business which may be located on a farm but is not related to the farming operation such as a gravel pit. If a farm has employees performing work not fitting within the agricultural labor exemption, the employer should consider whether the white collar employee exemption applies.
Once effective, the new law increases the salary base for white collar employees from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). This means white collar employees earning more than $47,476 per year need not be paid overtime and workers earning less will be entitled to overtime pay for working more than 40 hours in a standard work week. Consequently, as of December 1 this year, a farm’s salaried office worker earning $45,000 per year will be eligible for overtime pay for all hours over 40 per week, unless this person qualifies for the agricultural labor exemption. However, to be eligible for the white collar employee exemption, an employee must also meet the applicable DOL duties test for the particular type of white collar employee: executive, administrative, or professional.
To meet the DOL duties test, an executive’s primary duty must be managing the operation through directing the work of at least two full-time employees and have the authority to influence hiring, firing, or promotion of employees. For an administrative employee to be eligible for the white collar employee exemption, the employee’s primary duty must be office or non-manual work, exercising discretion and independent judgment in significant matters. Lastly, the white collar employee exemption for professionals is reserved for an employee performing predominantly intellectual work, in a field of science or learning acquired by a long course of study. To read more about the white collar employee exemption, see DOL’s website at https://www.dol.gov/whd/overtime/fs17a_overview.htm