By 2016, millions of employees around the country could become newly eligible for overtime pay due to a change in federal rules.
When the Fair Labor Standards Act (FLSA) was enacted in 1938, one of its most important provisions was “time-and-a-half pay” for workers who put in more than 40 hours per week. This rule provided a financial incentive for employers not to overwork their employees, encouraged employers to hire more people, and rewarded workers with higher pay when they clocked extra time.
Currently, only 8% of salaried workers can count on overtime protection. That’s a huge decline from from 1975, when more than 60% of the salaried workforce got overtime pay. The cause for such a dramatic decrease is attributed to “white-collar” exemptions, which exclude certain executive, administrative, and professional workers from FLSA protections. The present salary threshold is outdated; in order to be overtime-exempt, an employee must be paid a salary of at least $455 a week, or $23,660 a year. This threshold has not been adjusted for more than a decade.
The department of labor is acting to remedy overtime pay by proposing a more realistic weekly salary threshold of $970, or $50,440 annually for a full-time worker. According to the Economic Policy Institute, this threshold will ensure that at least 44% of all workers are automatically covered by the FLSA’s overtime protections.
What could this mean for employers?
These reforms will boost incomes for working people and create jobs. Some employers will pay overtime wages to workers who must be reclassified while some will spread hours out among existing employees, including part-timers, giving them more hours. Others will hire new employees, giving the unemployed the opportunity to get back to work.
The Labor Department has taken the first step to strengthen the middle class wages and give overtime regulations their intended scope. The department has taken a temporary pass on addressing the duties test, and other matters (i.e. bonuses and commissions) inviting further comments. These proposed regulations are subject to a 60-day public comment period. This process is likely to take at least six to eight months and a final ruling is not expected until 2016.