On July 6, 2015, the Department of Labor (DOL) proposed a new set of requirements for workers who may receive overtime wages. The proposed rule expands the class of overtime eligible employees. The DOL’s proposed rules are in direct response to President Obama’s executive request to review and revise the current overtime regulations, which currently prevent certain classes of salaried workers from receiving overtime compensation. Specifically, Obama asked the DOL to reevaluate the salary threshold at which employers are no longer obligated to pay employees overtime.
The salary threshold has been $23,660 ($455 weekly) since 2004. Currently, the Fair Labor Standards Act (FLSA) exempts certain administrative, outside sales, and other “white collar” employees from receiving overtime wages, if they earn at least $23,660 annually and exercise certain amounts of independent judgment and discretion in performing their job duties. The proposed rule would more than double the salary level under which these “white collar” and administratively exempt workers would qualify for overtime pay. The $23,660 threshold would increase to $50,440 ($970 weekly), under the proposed rules. The new threshold will not be indexed to overall price or wage increases. It would be linked permanently to the 40th percentile of income, which is the level it was set at when the overtime rule was first created under President Franklin Delano Roosevelt.
While some labor advocates have praised the proposed rule as a critical first step to ensuring Americans are fairly compensated, others offer harsh criticism. Randy Johnson, senior vice president of Labor, Immigration and Employee Benefits called the rule “another example of the administration being completely divorced from reality and adding more burdens to employers and expecting them to just absorb the impact.”
The rule could raise wages for an estimated five million Americans. Under the proposed rule, convenience store managers, fast food assistant managers, and some office workers would soon become eligible to receive overtime wages. Regardless of personal opinion about the rule, the expansion of the FLSA’s overtime provisions will affect businesses across the board, and should prompt many employers to reevaluate their current compensation schemes.
Note: The Notice of Proposed Rulemaking (NPRM) published on July 6, 2015 in the Federal Register (80 FR 38515) and interested parties are invited to submit written comments on the proposed rule at www.regulations.gov on or before September 4, 2015.