HR Management & Compliance

As new overtime rule nears, questions surface about salary threshold

by Tammy Binford

As time winds down for the U.S. Department of Labor (DOL) to release its final rule changing who is eligible to collect overtime pay, reports are surfacing that the salary threshold may be somewhat lower than the figure originally proposed but still considerably higher than the level in the current rule.  OvertimeCalcultions

The DOL released a proposed rule in June 2015 that more than doubled the salary requirement for workers to be exempt from the Fair Labor Standards Act’s (FLSA) overtime requirements. Under the current regulations, employees are exempt from the FLSA if they are paid a predetermined fixed salary of at least $455 a week ($23,660 a year) and if they perform certain executive, administrative, professional, computer, or outside sales duties.

As proposed, the rule would change the salary requirement from $455 a week to $970 a week ($50,440 a year). But at least one news outlet reported on April 29 without naming sources that the threshold in the final rule may be lowered to $47,000 a year.

It’s not clear just when the final rule will be released, but it’s expected sometime in May. The rule was submitted to the Office of Management and Budget on March 14, a necessary last step before it can be finalized.

Using the threshold in the proposed rule, the DOL estimated that 5 million workers would lose their exempt status, meaning they would be eligible for overtime pay of at least one and a half times their normal rate of pay for all hours worked over 40 in a workweek.

In addition to changing the salary threshold, the proposed rule provided a mechanism for automatic updates of the salary floor based on inflation or wage growth over time. As proposed, the rule would set the standard level at the 40th percentile of U.S. workers’ weekly earnings for full-time salaried work. Until the final rule is released, it won’t be known what the threshold will be and whether the automatic update feature will be included.

After learning of the unconfirmed report about the change in the salary threshold, Susan Fentin, an attorney with Skoler, Abbott & Presser, P.C., in Springfield, Massachusetts, questioned whether the DOL may be backing away from the original plan to benchmark the minimum salary level at the 40th percentile. “We’re not sure whether this means that the new minimum salary will be fixed for another period of time or whether it will change from year to year as was originally proposed,” she said.

While new requirements won’t be known until the final rule is released, employers need to plan for whatever changes come. If an employer plans to raise employees’ wages to maintain exempt status, the employer should take this opportunity to redo its job descriptions and be sure they meet the appropriate exemption, Fentin said. “Changing the minimum salary level might not address all the problems, and you might find yourself with a misclassification problem at a higher annual wage,” she said.

Charles S. Plumb, an attorney with the McAfee & Taft law firm in Tulsa, Oklahoma, also urges employers to prepare for the release of the final rule. “Use this as an opportunity to solve any preexisting FLSA problems you have—things like current misclassifications,” he said. “Do an audit as part of your preparation for the new regs, and fix any problems you have.”

In addition to a possible change in the salary threshold, many observers question whether the final rule also will change the duties test related to which employees can be considered exempt. Under the current rule, employees who meet the salary test also must be in what are generally considered “white-collar” positions in which their primary duty is to perform certain executive, administrative, professional, computer, or outside sales tasks.

The proposed rule didn’t call for any changes to the duties test, but the DOL did request comments on possible changes, leading some to think a final rule might require that exempt employees spend at least a certain percentage of their time on exempt duties.


Need to learn more? Join us May 11 for the live webinar DOL Final Overtime Exemption Rule: What You Need to Do to Comply to learn how the DOL’s final rule on overtime exemptions will affect how you pay, schedule, and manage your workforce, including the critical impact the new rule is likely to have on the salary basis test, factors used to determine one’s eligibility under specific overtime exemptions, and much more! For more information or to register, click here


3 thoughts on “As new overtime rule nears, questions surface about salary threshold”

  1. As someone who has watched my own, and my employees’ hours ever increasing in the name of corporate profits.. I wholeheartedly agree with this.

    Capitalism has made our country great.. but it cannot go completely unbridled.

    There is no way on earth a burger flipping minimum wage.. minimum effort lifer should earn $15/ hr… but on the flip side of that.. we should not be able to take a $12/hr employee who is trying to further their career, put them on salary (with no raise) and force them to work 50+ hours a week.

    A (REASONABLE) minimum wage and a overtime threshold that covers most middle class workers are necessary protections to keep our greed in check and promote effective people / schedule management.

  2. I was a construction foreman for 23 years until i had a stroke 7 years ago. I worked 60 to 70 hours a week on straight time never did I receive any overtime benefits. this is totally unfair that companies like these can get by with this!

  3. I am a middle-manager, HOURLY employee. I work an average of 45-50 hours per week and have never received time and a half for overtime. I’ve clocked several hundred overtime hours in my years at this company and have never received a anything more than straight pay. I am considered a manager (but do not supervise), I have to punch a time clock, and am an hourly employee, exempt from time and one-half. Do the rules not apply to certain small businesses or are they making their own rules?

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