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Local Governments and School Districts Blog

Overtime Final Rule for State and Local Governments

Authored by Kevin J.T. Terry
Posted on May 27, 2016
Filed under Local Governments and School Districts

The Department of Labor’s final overtime rule (“the Final Rule”) updates the salary level required for the executive, administrative, and professional (“white collar”) exemption to overtime pay requirements to assure that the FLSA’s intended overtime protections are fully implemented, including for state and local governments. The Final Rule updates the salary threshold under which most white collar workers are entitled to overtime to equal the 40th percentile of weekly earnings of full-time salaried workers in the lowest wage census region, currently the south. The Final Rule raises the salary threshold from $455 per week ($23,660 for a full-year worker) to $913 per week ($47,476 for a full-year worker) effective December 1, 2016.

Neither the FLSA or the Department’s regulations provide a blanket exemption from overtime requirements for state and local governments, nor for public sector workers. However, the FLSA contains several provisions unique to state and local governments, including compensatory time.

  • Comp time: State and local governments may arrange, through an agreement with employees, for their employees to earn comp time instead of cash payment for overtime hours. Most state and local government employees may accrue up to 240 hours of comp time. None of the changes to the overtime Final Rule affect the unique provision of comp time.
  • Fire and police small agency exemption: The FLSA also provides an exemption from overtime protections for fire protection or law enforcement employees, if they are employed by an agency that employs fewer than five fire protection or law enforcement employees, respectively. None of the changes to the Final Rule affected this provision.
  • “Work periods” v. “work weeks” for fire protection or law enforcement employees:  Employees engaged in fire protection or law enforcement may be paid overtime on a work period basis rather than the usual 40-hour work week of the FLSA. For example, if a law enforcement employee works a 14-day work period, the department’s regulations provide that he/she must receive overtime compensation after working 86- hours in the work period. None of the changes to the Final Rule affect this provision.

Many employee of state and local governments will not be affected by the Final Rule changes.

  • Hourly workers: The Final Rule will have no impact on the pay of workers paid hourly. Generally, all hourly workers are entitled to overtime pay or comp time regardless of how much they make if they work more than 40-hours. Nothing in the Final Rule changes that.
  • Highly compensated workers: White collar workers who fail the standard duties test but are “highly-compensated”, earn more than $134,004 in a year, are almost all ineligible for overtime under the highly-compensated employee exemption, which has a minimal duties test.
  • Elected officials: These state and local government employees who are elected officials are not covered by the FLSA and will not be impacted by the Final Rule.

In terms of compliance with the Final Rule, local government employees have many of the the same options in front of them as employers in the private sector. Local government units can raise salaries, pay overtime above a salary, evaluate and re-align employee work loads, or utilize comp time as a way to stay compliant with FLSA requirements under the Final Rule. While many of these options are not desirable, it is important to understand them moving forward. If you have questions regarding how the new overtime rule affects your specific municipality or which direction in terms of compliance best suits your local government, please contact any of the attorneys at Ruder Ware in the Local Government Focus Team including the author.