Enterprise Coverage Under New FLSA Rule

The upcoming increase in the salary level for exempt employees under the Fair Labor Standards Act (“FLSA”) applies to all exempt employees who are subject to the FLSA. The FLSA applies to employees through either “enterprise coverage” or “individual coverage.”  The standards for both enterprise and individual coverage will not change under the new rule.

Enterprise coverage applies when an entity, with employees engaged in commerce, has annual gross sales in the amount of $500,000 or more.  Enterprise coverage also covers employees of certain named entities, including hospitals, schools and assisted-living facilities, regardless of the amount of annual revenue they generate.  An employer’s nonprofit or for-profit status does not change whether enterprise coverage applies; however, the Department of Labor indicates that donations or charitable contributions do not count toward the $500,000 gross sales threshold.

Employers may not circumvent the gross sales threshold to avoid applicability of the FLSA overtime rules by classifying separate locations or divisions of their company as separate enterprises.  Furthermore, the analysis of whether the FLSA applies does not end with a check of the business’s gross annual sales level.  The FLSA also may apply through “individual coverage,” which requires a more detailed review of each employee’s job duties.

Stay tuned for more information on individual coverage next week and other practical information prior to the effective date of the new rules – and contact the attorneys at Nauman Smith with any questions you have about how the FLSA changes apply to your employees.