The long-awaited proposed rules to update the Fair Labor Standards Act overtime exemptions, issued June 30 by the U.S. Department of Labor, would extend overtime protections to an additional 5 million workers in 2016. The proposed changes would extend overtime coverage to all workers making up to approximately $50,400 per year.
The proposal, released just under the wire of DOL’s previously stated timeline, would increase the number of employees eligible for overtime at all employers by nearly doubling the existing compensation level required as part of the tests for whether an employee is exempt from the act’s overtime requirements. The current threshold to be exempt from overtime is $455 per week or $23,660 annually.
According to DOL, 11 million workers in the United States could benefit from the proposed changes — the 5 million who would be covered by raising the salary bar for exemption, and an additional 6 million who are properly classified as exempt but may fall into a “grey area.”
President Obama, in a Huffington Post editorial announcing the overtime changes, said too many U.S. workers are not rewarded for their hard work.
“Right now, too many Americans are working long days for less pay than they deserve,” Obama wrote. “That’s partly because we’ve failed to update overtime regulations for years — and an exemption meant for highly paid, white collar employees now leaves out workers making as little as $23,660 a year — no matter how many hours they work.”
Obama is expected to deliver public remarks about the overtime changes later this week.
DOL’s Proposal
The DOL proposal laid out three major changes to existing FLSA overtime rules:
- The salary threshold for exemption from overtime would more than double, to $970 per week, or $50,440 annually, possibly as soon as 2016. The salary bar would be raised to this level to equal the 40th percentile of earnings for full-time salaried workers, according to the notice of proposed rulemaking. DOL said it used existing data to project what the salary threshold would be in the first quarter of 2016.
- The proposal would also increase the highly compensated employee annual salary level to $122,148, or the 90th percentile of earnings.
- Finally, the proposal would include a mechanism in the regulations to automatically update the salary and compensation thresholds annually. That could be either based on a fixed percentage of wages or tied to the Consumer Price Index.
The proposal is also notable for what it did not do, which was to propose a specific change to the duties tests that are a key part of the overtime exemptions. DOL was widely expected to propose a quantitative standard threshold for the amount of time a worker could spend in nonexempt work if they were considered exempt from overtime. Instead, the DOL proposed rule solicits input from employers and stakeholders on possible changes to the duties tests that could be implemented in final regulations.