In big news to employers, President Obama is directing the Department of Labor (DOL) to issue proposed regulations that would expand the number of employees who are eligible for overtime.
To address the changing nature of today’s workplace, the DOL is to consider how the regulations could be revised to update existing protections consistent with the intent of the Fair Labor Standards Act (FLSA). Current regulations are difficult for both workers and businesses to understand and apply. The directive is aimed at the regulations regarding exemptions from the FLSA’s overtime requirement, particularly for executive, administrative, and professional employees (often referred to as "white collar" exemptions).
Workers who are paid hourly wages or who earn below a certain salary are generally protected by overtime regulations, while those above the threshold who perform executive, professional or administrative duties are not. Currently, many businesses aren't required to pay overtime to certain salaried workers if they earn more than $455 a week, a level that was set in 2004 and comes to roughly $24,000 a year. For example, a convenience store manager, a fast-food shift supervisor, a loan officer or an office worker may be expected to work 50 or 60 hours a week or more and not receive a dime of overtime pay.
New regulations also could tighten up the executive exemption as well. According to White House officials, the rules might mandate that employees do a specified percentage of “executive”-type work before being exempted.
While it’s not clear what a new proposed salary threshold would be, some speculate that it could more than double. One recent proposal would raise the limit to $984 per week (about $50,000 a year). Under this scenario, experts estimate that more than 5 million employees would be entitled to overtime pay who currently are not.
Many states have their own wage and hour laws with salary thresholds above what current federal law requires. For example, in California an employer cannot deny overtime pay to a salaried worker who makes less than $640 a week. In New York, the threshold is $600 a week. Under recently passed laws, the California threshold is set to rise to $800 per week in 2016, and the New York threshold to $675.
The overtime expansion is part of a multi-pronged administration effort to increase wages for low- and middle-income Americans which have largely stagnated in recent years. Employers and others will have an opportunity to comment on the proposed rules before they go into effect.