News & Insights

In last months issue of Mind Your Business: PA School Bus Edition, we discussed the job duties test as a component of determining whether an employee is exempt from overtime under the Fair Labor Standards Act (“FLSA”). However, the job duties test is only half of the analysis. To qualify for most exemptions under the FLSA, employees must satisfy both the duties test and the salary test.

In order to qualify as an exempt executive, administrative, or professional employee, an employee must be paid on a salary basis at a rate of $684 per week (approximately $35,568.00 annually). 29 C.F.R. §541.600. Some may recall the 2024 Overtime Rule that was adopted by the United States Department of Labor (“US DOL”) under the Biden Administration, which sought to increase the salary threshold to $1,128 per week (approximately $58,656.00 annually). The 2024 Overtime Rule was vacated by a federal district court in Texas, and the Department of Labor’s appeal was ultimately dismissed by the Fifth Circuit on May 5, 2026. On May 14, 2026, the US DOL announced that it was formally rescinding the 2024 Overtime Rule, and so the salary threshold will remain at its current level for the foreseeable future. Employers should also be aware that there is a separate exemption for highly compensated employees. Employees who make in excess of $107,432 annually (approximately $2,066 per week) and customarily and regularly perform any one or more of the exempt job duties may be exempt from overtime, despite not fully satisfying the duties test. Of note, the highly compensated employee salary threshold was also subject to change under the 2024 Overtime Rule; however, this amount is also no longer changing.

US DOL guidance provides that an employee will be considered to be paid on a salary basis if the employee regularly receives a predetermined amount constituting all or part of an employee’s compensation on a weekly or less frequent basis, provided such amounts are not subject to reduction for the quality or quantity of work performed. 29 C.F.R. §541.602(a). For most employers, determining whether an employee satisfies the salary test is much easier than determining whether an employee satisfies the job duties test. But, some employers may wrongly classify employees as salaried when they are not, or incorrectly assume that paying an employee a salary automatically categorizes the employee as exempt. Ultimately, employees may be paid a salary on a salary basis, but still be entitled to overtime pay if the employee does not satisfy the applicable salary threshold and duties test.

School bus operators are encouraged to periodically conduct a review of their employees’ classifications to ensure that employees are properly classified as exempt or non-exempt and that non-exempt employees are receiving overtime. If you are reviewing your employees classifications, or have questions on anything addressed above, email us at help@rckelly.com or call 215-896-3846.