5 Million Workers to Get Overtime Pay
It is estimated that at least 5 million working Americans will be eligible for overtime if the Department of Labor changes its rules regarding ‘exempt’ employees. Generally there are two parts to determining whether the white collar worker is exempt: 1) the Duties test; and 2) the Salary test. The proposed rule focuses primarily on updating the salary and compensation level required to be identified as exempt from overtime pay requirements. The Department of Labor’s intent is to limit the number of workers who are identified as exempt from overtime. Here’s the comparison between today’s rules and what has been proposed:
- Salary = Minimum of $455/week ($23,660/year).
- Duties= Exercise discretion & independent judgment; Manage business operations or people.
- Minimum of $921/week ($47,892/year) in 2015.
- Goes to $970/week ($50,440/year) in 2016 and is adjusted yearly to the 40th percentile of weekly earnings for full-time salaried workers.
- Changes to duties test have not been proposed yet, but the Department of Labor is asking for comments on the current requirements.
Three things to do right now:
- Review the job descriptions of the employees who are classified as exempt and do not get overtime. Do the job descriptions describe a position that meets the “Duties Test” for Executive, Administrative, or Professional employee? This might be a good time to ask an experienced employment attorney for some assistance.
- Determine who this affects in your organization. Take a look at anyone who is salaried (not getting overtime) and is making less than $47,892 per year. If they are working more than 40 hours per week (best guess – since we don’t necessarily track hours for exempt staff)
- Decide if you will be: 1) giving them a raise above the $921/week; or 2) converting them to hourly and adjust their hourly rate (downward – assuming that the extra time they were working was rolled into their old salary). After they are converted to hourly, pay time and a half for all hours worked over 40 in a week.
When will this change take place?
While this is only a proposal from the Department of Labor, the President has been talking about this for a long time. There will be a 60 day comment period but don’t expect the salary test to change much. When the final rule is issued, it will in all likelihood become effective 60 days after the publication of the rule in the Federal Register. Stay tuned for updates as we go through the rulemaking process!