Hot Topic - Sweeping Overtime Changes

Last year we announced that President Obama had ordered the United States Department of Labor to update overtime regulations. These regulations are hugely important, as they 1) set salary threshold for overtime, meaning that generally people who receive less than this amount are entitled to overtime, and 2) define the scope of overtime exemptions, meaning that even if employees earn more than the salary threshold, they may still be entitled to overtime depending on the nature of their work.

​The salary threshold has remained fixed for over a decade at $455 per week, which is less than $24,000 per year, below the poverty threshold for a family of four. Only 8% of full-time salaried workers earn less than this amount. Contrast the situation today with the situation in 1975, when over 60% of full-time salaried workers were eligible to receive overtime! The low salary threshold, plus numerous exemptions, means that employees like managers, assistant managers and clerical employees who work long hours and perform largely low-level tasks are often paid a meager salary that does not include overtime and sometimes comes out to less than minimum wage on a per-hour basis. We’ve heard heartbreaking stories of managers who work menial jobs and do not take home minimum wage to their families for sixty-hour workweeks.

Finally, in July 2015, the Department of Labor announced that the rules governing overtime would be updated and revised to cover millions more American workers. The proposed rules would raise the salary threshold to the 40th percentile of weekly earnings—in 2016, this will equal about $970 per week, or $50,440 per year. They would also automatically raise the salary threshold based on changes in the average national income. The Department of Labor has not made any changes to the exemptions tests as of yet but continues to explore whether the exemptions should be updated and clarified.

It is unknown exactly when the new regulations would go into effect, since it depends on the timeline to move through the rulemaking process, finalize, and implement the regulations. The new rules could be in effect as early as January 2016.

Other sources:

Hot Topic - White House Employment Agenda

Department of Labor blog.