FLSA Overtime Regulations in Wisconsin

The Wisconsin Nonprofits Association (WNA) has been tracking information about the recent changes to the Fair Labor Standards Act (FLSA) regarding overtime compensation for employees.  Much information about changes is available through the Federal Department of Labor, however, states are allowed to enact more stringent protection of workers—and Wisconsin does so.

Following is a summary of information received by WNA on June 7, 2016, from the Wisconsin Department of Workforce Development.

There are also documents and links to more detailed federal-level information listed on WNA’s website.  WNA will continue to track and communicate any new information as it becomes available.

Overtime Coverage

The state overtime law applies to most Wisconsin employers, including state and local units of government but not necessarily to each individual worker. Covered workers, regardless of age, must be paid 1 1/2 times their regular rate of pay for all hours worked in excess of 40 hours a week.

The law applies to factories, mercantile (see definition of mercantile) or mechanical establishments, restaurants, hotels, motels, resorts, beauty parlors, retail and wholesale stores, laundries, express and transportation firms, telegraph offices and telephone exchanges.

“Mercantile” means, “pertaining to merchants or trade,” and is viewed with regard to profit or designed for profit; designed for mass appeal, emphasizing skill and subjects useful in business. “Trade” means the business or work in which one engages regularly, an occupation requiring manual or mechanical skill; the persons engaged in an occupation, business, or industry, dealings between persons or groups, the business of buying and selling or bartering commodities or services, to do business with, to have dealings, to give one thing in exchange for another.

Under the Wisconsin Employment of Minors regulation, 16 and 17-year-old minors may be employed more than 8 hours a day or 40 hours a week when school is not in session. They must receive one and one-half times the regular rate of pay, for all hours worked in excess of 10 hours per day or 40 hours per week and that, they do not work in excess of 50 hours per week. The exception to this rule is that minors who are 14 to 17 years of age may be employed more than 50 hours per week in agriculture during peak periods.

Establishments Exempt from Overtime — All Employees

  1. Agriculture (farming) as defined as WI Stats. 102.04(3)
  2. Domestic service (in the private home of the employer)
  3. Some non-profit organizations (contact the Division for specific information)
  4. Federal agencies

Current Federal Law

Currently under the FLSA, in order to be exempt from federal overtime requirements under the white-collar exemptions, employees must:

  1. be paid on a salary or fee basis; See also How to use the Compensation Report
  2. be paid a salary of at least $455 per week;
  3. and meet a “duties test” for exempt salaried executives, administrative employees, or professionals.

The law also contains a “highly compensated employees” test that allows employees who perform office or non-manual work and who are paid total compensation of at least $100,000 to be exempt as long as they perform just one of the duties of an exempt executive, administrative employee, or professional. For more detail, see the Department of Labor (DOL), Wage and Hour Division’s Fact Sheet #17A, which details the requirements.

The Basic Changes

The changes to the FLSA’s rule (29 C.F.R. part 541) are as follows:

  • The salary minimum needed to meet the exemption will increase to $913 per week or $47,476 per year.
  • Up to 10% of the salary minimum may be from nondiscretionary bonuses and incentive payments, including commissions ($91.30 per week), as long as such payments are made at least quarterly.
  • The minimum annual compensation for exempt HCE employees will be increased to $134,004.
  • Establishes a mechanism whereby the annual salary minimums will be adjusted every three years, beginning in January 2020.

The salary minimum was set at the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region (currently, the South). The HCE salary minimum was set at the 90th percentile of weekly earnings of full-time salaried workers nationwide.

The Duties Test

It is important to note that although the July 2015 proposal to modify the rule sought comment on potential changes to the duties test, no changes were adopted. See also this page how Wisconsin Nonprofits Association membership provides programs, products, and services at a reduced cost.

Wisconsin Requirements Affect the Analysis

More importantly, employers must keep in mind that Wisconsin has a more stringent exemption test in place. The federal law specifically authorizes states to have stricter requirements. Wisconsin’s duties tests contain percentage limits on non-exempt work (20% for most occupations; 40% in retail and service establishments) similar to the pre-2004 federal “long test” that – for most employers – make the federal duties test inapplicable.

Likewise, Wisconsin’s salary minimums have not been updated for many years are not applicable to employers subject to both federal and state law ($700 per month for executives and administrative employees; $750 per month for professionals).

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