Wednesday, July 1, 2015
Department of Labor’s Proposed Rule Would Make Millions of Employees Eligible for Overtime
The United States Department of Labor’s Wage and Hour Division recently announced a proposed rule that would change the Fair Labor Standard Act (“FLSA”) overtime rules by increasing the salary thresholds for exemptions under the FLSA. The proposed rule, if ultimately implemented, will have huge implications for employers.
The FLSA generally requires that employers pay employees for any time worked in excess of forty hours per week at a rate of one and a half times the employee’s regular rate. Contrary to some people’s belief, salaried employees are not automatically exempt from the FLSA’s overtime requirements. The law does, however, exempt so-called “white collar” employees and highly compensated employees from its overtime requirements. The proposed rule would significantly raise the salary threshold for those exemptions.
Currently, employees qualify for a “white collar” exemption by meeting three criteria: (1) the employee receives a fixed salary; (2) the salary meets the minimum threshold requirement of $455 per week, or $23,660 per year; and (3) the employee’s responsibilities primarily involve executive, administrative, or professional duties. Highly compensated employees who regularly perform one or more exempt duties and receive a salary of at least $100,000 per year are also exempt. The Department of Labor last updated the salary thresholds in 2004.
Prompted by President Obama, the Department of Labor seeks to raise the threshold amounts to $921 per week or $47,892 per year for the “white collar” exemptions and to $122,148 for highly compensated employees. Under the new rules, these thresholds would increase annually and for 2016 are projected to be $970 per week, or $50,440 per year. The threshold for highly compensated employees’ is also projected to increase in 2016. Of course, the increases would have a significant effect on businesses. The Department of Labor estimates that approximately 4.6 million employees would fall in the salary gap between the current thresholds and newly proposed thresholds. Absent an increase in these employees’ salaries, they would no longer meet an exemption and would be entitled to overtime for hours worked in excess of forty hours per week.
The Department of Labor is currently accepting comments on the proposed rule. The comment period will be closed in sixty days. Zashin & Rich will monitor any developments concerning the proposed rule closely.
*Michele L. Jakubs, an OSBA Certified Specialist in Labor and Employment Law, practices in all areas of labor and employment law and is particularly adept at handling wage and hour issues. If you have questions about how the Department of Labor’s proposed regulations may impact your company, please contact: Michele L. Jakubs | mlj@zrlaw.com | 216.696.4441