Number of Employees Entitled to Overtime Pay Likely to Increase
Proposed changes from the Department of Labor to overtime laws are likely to result in more change in the pockets of many employees. The number of employees that are entitled to overtime pay will significantly increase if the Department of Labor’s proposed changes to the minimum salary requirement for exempt status under the Fair Labor Standards Act are adopted.
Who is Exempt?
In many situations, for an employee to be exempt from the overtime requirements under the Fair Labor Standards Act, three tests need to be met:
(1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed
(2) the amount of salary paid must meet a minimum specified amount
(3) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations
Current Minimum Salary to be Exempt
The current minimum salary requirement for exempt status is $455 per week ($23,660 per year). It has been over 10 years since the salary threshold has been increased. According to the DOL Secretary Tom Perez in his July 1, 2015 blog, this salary threshold has left many workers in positions that meet the duties test for the exempt status, working well over 40 hours a week with no overtime time pay and earning a salary that falls below the current poverty level for a family of four.
The Department of Labor has now proposed to increase the minimum salary requirement for exempt status to $921 per week ($47,892 annually). The DOL’s goal was to increase the standard salary level to the 40th percentile of weekly earnings for full-time salaried workers and establish a mechanism for automatically updating the salary threshold in the future to prevent this disparity from continuing. As is currently proposed, this would raise the salary threshold to approximately $970 a week ($50,440 a year) in 2016.
Be Prepared If Proposed Change Becomes Law
Millions of American workers and their families stand to benefit in the form of bigger paychecks or more time off if these proposed changes are adopted. This also means that employers need to stay informed on this issue, prepare for such changes and ensure compliance if the proposed rule, or some variation, becomes the law. Note, however, that at this time, the proposed rule is still just “proposed”. The DOL is encouraging interested parties to submit comments. The full text of the proposal, as well as information on the deadline and procedure for submitting comments, can be found at the DOL Wage and Hour Division’s Proposed Rule website.