Earlier this month, the United States Department of Labor published proposed regulations to expand the class of employees entitled to overtime compensation under the Fair Labor Standards Act.
The Act generally requires that employees be paid premium overtime compensation for all hours worked in excess of 40 in a workweek, but the law also contains exceptions for certain types of employees. Specifically, the regulations provide that an employer need not pay any overtime compensation if all three of the following elements are present:
- the employee is paid on a salaried basis (i.e. is paid the same amount each week regardless of the quality or quantity of work),
- the salary exceeds $455 per week ($23,660 annually), and
- the employee’s work duties fall into certain enumerated categories involving administrative, executive or professional duties.
The most notable change in the newly proposed rule would increase that $455 threshold, which has not been adjusted in more than a decade. In addition, instead of establishing a specific amount, the proposed regulations would provide for an annual adjustment to this threshold. The amount would be set at the 40th percentile of weekly earnings for full time salaried workers. Based on 2013 data for all full time salaried workers, this threshold would be $921 per week (or $47,892 annually), and the Department of Labor projects that in 2016, when the regulations likely would take effect, the amount would be approximately $970 per week ($50,440 annually).
As you can see, this change, to more than double the threshold amount, will increase greatly the number of employees eligible to paid on an overtime basis. The Department is seeking comments on the proposed rule, and we will monitor the status of the proposal. Stay tuned for updates.