Salary Thresholds Under New York State Law For White Collar Overtime Exemptions
In Part One of this article, we discussed tests for allowing exemption from overtime pay for “white collar” professional, executive and administrative employees under federal and New York State law.
Effective December 31, 2018, New York State’s salary basis threshold for exempt executive and administrative (but not professional) employees increased. Employers should periodically review the job duties, functions and salaries of those currently classified as exempt and, if they wish to maintain the exemption for those below the new thresholds, must increase their salaries accordingly. Here are the new minimum salary requirements to maintain exemptions from overtime for employers in New York State:
Employers in New York City
- Large employers (11 or more employees)
- $1,125.00 per week ($58,500 annually) on and after 12/31/18
- Small employers (10 or fewer employees)
- $1,012.50 per week ($52,650 annually) on and after 12/31/18
- $1,125.00 per week ($58,500 annually) on and after 12/31/19
Employers in Nassau, Suffolk, and Westchester Counties
- $900.00 per week ($46,800 annually) on and after 12/31/18
- $975.00 per week ($50,700 annually) on and after 12/31/19
- $1,050.00 per week ($54,600 annually) on and after 12/31/20
- $1,125.00 per week ($58,500 annually) on and after 12/31/21
Employers Outside of New York City and Nassau, Suffolk, and Westchester Counties
- $832.00 per week ($43,264 annually) on and after 12/31/18
- $885.00 per week ($46,020 annually) on and after 12/31/19
- $937.50 per week ($48,750 annually) on and after 12/31/20
New York State has no minimum salary for exempt “professional” employees, although most of those employees would still be subject to the federal salary minimum for exemption ($455 per week, or $23,660 annually). The U.S. Department of Labor (“DOL”) has not raised the federal minimum salary for exemption since 2004, but on March 7, 2019, the DOL published a proposed rule that would increase the salary threshold for managerial, administrative and professional white collar exemptions to $679 per week ($35,308 per year), to take effect on January 1, 2020.
New York Fashion Industry employers should review the job duties, functions and salaries of their employees whom they currently classify as exempt from overtime pay to insure compliance with both the job duties and salary requirements. For an employee whose salary falls below pay requirements, the employer will have to decide whether to increase the salary in order to be able to continue the overtime exemption or to reclassify the currently exempt employee as non-exempt and pay them overtime for hours worked over forty in a week.
For those currently exempt employees whom the employer decides to reclassify as non-exempt, the employer should insure that all their work time is accurately recorded as of the date of change and going forward. Finally, employers should make it a point to conduct regular reviews of the primary duties of those employees it wishes to continue as exempt, since merely paying the higher salaries will not be sufficient. To qualify for the overtime exemption, employers will be required to meet both the salary test and the job duties test.
Federal and state overtime law are quite fact specific. Failure to comply can lead to expensive administrative and court proceedings. The statutes of limitations – that is, the look back periods the agencies and the courts may consider in calculating overtime pay deficiencies – are two years under federal law (three years if a willful violation is found), but are six years under New York State law. And both federal and state laws provide for liquidated (double) damages and for an employer to pay the legal fees of a successful plaintiff’s lawyer. Moreover, class and collective actions abound. In short, stay current on what you need to know and consult with employment counsel as needed and whenever in doubt; or be prepared to endure exceedingly painful, protracted and costly legal consequences.
Credit: Evan J. Spelfogel
One of the most costly mistakes a fashion business can make is to misclassify an employee as overtime exempt regardless of the employee’s duties and functions. That creates the risk of substantial liability under both federal and state law.
The Federal Fair Labor Standards Act provides for several basic overtime exemptions. These include the executive, professional and administrative exemptions and are commonly referred to as “white collar” exemptions.
To be exempt from overtime pay, an employee must be paid a fixed salary regardless of hours worked of at least $455 per week ($23,660 per year) under federal law, and more than twice that amount under New York State Labor Law, and must have duties and functions that fall within the applicable duties test.
Executive Exemption Duties Requirements
To qualify as an exempt executive (high-level manager), an employee’s primary duties must relate to managing a business or a department within a business. The employee must regularly supervise at least two full-time employees or the equivalent in part-time employees, and must have the authority to hire, fire and discipline employees, or effectively to recommend such action. Secondary tests include interviewing and training employees, and assigning and directing their work. Typically, this exemption would attach to store and departmental managers.
Administrative Exemption Duties Requirements
To qualify as an exempt administrative employee, the employee’s primary duties must consist of the performance of office or non-manual work directly related to management policies or general business operations, including customarily and regularly exercising discretion and independent judgment involving the comparison and evaluation of alternative courses of conduct and making decisions, after consideration of the various possibilities, free from immediate direction or supervision.
Duties may relate to taxes, 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, and legal and regulatory compliance.
Factors may include whether the employee formulates, affects, interprets, or implements policies or practices, whether the employee may commit the employer in matters having significant financial impact, and whether the employee has authority to waive or deviate from established company policies and procedures without prior approval.
Professional Exemption Duties Requirements
An exempt professional employee is one who falls under the definition of either a “learned professional” or a “creative professional.” Learned professionals work in professions typically requiring an advanced degree (college or higher) and a prolonged course of specialized intellectual instruction such as law, medicine, accounting, engineering, teaching, or architecture. Primary duties must be intellectual and involve the regular use of discretion and independent judgment.
Creative professionals in the fashion industry include, among others, fashion designers, fashion stylists, textile designers, fashion public relations, fashion writers, fashion illustrators, garment technologists, graphic designers and artists, creative employees who are given only a subject matter or underlying concept of what they will create, and individuals who plan and direct the creative elements of new fashion and their advertising agencies. These individuals’ primary duty is performing work that requires invention, imagination, originality or talent, as distinguishable from work dependent merely on intelligence, diligence, and accuracy. Examples of non-exempt work in fashion include fabric cutters, sizers, copyists, re-touchers of photographs, and rewriters of press releases or advertising copy, and general fashion industry employees whose work is subject to substantial control.
In Part Two, we will review in detail the New York State salary thresholds for overtime exemption.
Evan is a senior counsel in the Employment & Labor Law Practice.
Looking back on Paris Fashion Week 2018, it is fun to reflect on the undeniable allure of Paris. Maybe it is the Parisian lights. Maybe it is because it is the City of Love. But there is something that attracts Francophiles from all over the world. A long-time fashion hub, Paris has been winning the hearts of more and more American fashion designers. Traditionally, New York Fashion Week is the reference mark for American design. Yet in just the past year, American designers Rodarte, Proenza Schouler, Thom Browne, and Joseph Altuzarra have opted to show their collections in Paris instead.
All of the Americans in Paris cited creativity as the major reason for relocating their spring and fall shows to Paris. Prior to Rodarte’s Paris Haute Couture Week debut last summer, co-founder Laura Mulleavy told The New York Times’s Elizabeth Paton: “I like being part of a new situation.” Co-founder Kate Mulleavy expanded:
“Ultimately a process should fuel creativity…France treats fashion as art; it just isn’t like that in America. Just spending time in [Paris], being part of it, is a reminder that enjoying new experiences fuels your best ideas and designs. Your imagination can totally come alive.”
Nevertheless, new opportunities also bring new legal issues. The initial question regarding work in France often is: Will I need visas or work permits for my American staff in order to show my collection in Paris? The good news: since 2016, if you are working in France for three months or less for the purpose of putting on a trade show, an art exhibition, or a fashion show, you need neither visas nor work permits.
Also, keeping in mind that French law emphasizes employee well-being, France requires its foreign employers to have documentation on file with the French counterpart to the United States Social Security Administration.
France and the United States have a reciprocal agreement whereby time spent working in France is considered eligible for social security and future benefits, like retirement, disability, and survivor’s insurance, in the United States. US employers must file a social security form for each employee working abroad. However, those benefits (as with so many others) do not apply to independent contractors. Therefore, those make-up artists, hairstylists, and public relations personnel employed by others but who are “hired out” by designers for shows must have their own full-time employers file social security forms for them.
Before starting work in France, an American employer transferring employees temporarily must file a declaration of workplace safety with the office for the International Posting of Workers in France, also known as Prestation de Services Internationales en France (SIPSI). Upon such filing, SIPSI will alert the French authorities responsible for inspecting the posting locations of foreign employees to examine the proposed fashion show site. Unlike the multiple social security forms required by an employer in the US, only one SIPSI filing is needed per employer, per location.
Much as in the critically acclaimed movie, as an American in Paris you will want to spend your free time eating baguettes, sightseeing, taking pictures, creating memories, and perhaps falling in love. It therefore would be wise to consult counsel and to address the business and legal issues in advance so that, once the fashion show has been completed, you will be able devote your time to drinking wine, eating cheese, and indulging in the many facets of French culture.
Credit: Candace R. Arrington
Photo Credit: Greg Kessler