Obama to Order Change to Overtime Exemption Rules

President Obama is expected today to expand his economic agenda by announcing an effort to increase overtime for a large number of American workers.  According to a report from the New York Times, President Obama will direct the Labor Department to amend regulations implementing the Fair Labor Standards Act.

The Act requires that overtime be paid for hours worked in excess of forty in a workweek, but it also exempts certain “white collar” positions held by executive, administrative and professional employees.  In order for an employer to take advantage of the exemption, and not pay overtime compensation, the employee currently must be paid on a salary basis in an amount of at least $455 per week.  It is that $455 threshold that President Obama will seek to change, for the first time since it was raised to that level by the Bush administration in 2004.  By increasing that threshold again, President Obama can increase the overtime entitlement to millions of workers.

Employers, of course, will worry about the increased cost of employing workers, while experts warn of unintended consequences like employers cutting back on their numbers of employees.

When considering the exemptions, it is always important to remember that, despite common misconception, it is not sufficient that an employee be paid on a salary basis in order to be exempt from overtime requirements.  It also is necessary that the employee’s job consist of certain duties, determined by the particular exemption sought.

The process of amending the regulations is not necessarily a fast one, so even if a chance is made to the exemptions, it will not take effect for quite some time.  Stay tuned for more updates as this matter develops.

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