New Labor Rules Bring Overtime Pay To Millions Of Salaried Employees

Let’s say you’re an assistant manager at a fast-food restaurant making a salary of $35,000 per year. Your restaurant is drastically understaffed, and even though you work up to 20 hours of overtime per week, you don’t receive any additional compensation for the extra hours. Is this OK?

Somewhere between 4.5 and 12.5 million Americans find themselves in a similar situation every week. Under the current Fair Labor Standards Act, salaried workers making more than $23,660 per year are not eligible for overtime pay if their jobs include some traditionally “white collar” duties (such as restaurant management).

New rules announced on May 18 by the Department of Labor will change that. Starting December 1, 2016, salaried employees who make less than $47,476 per year will be eligible for time-and-a-half overtime pay when they work more than 40 hours in a week. The new rules also include a system that will automatically increase the salary threshold every three years, meaning that, in the future, even more employees will qualify for overtime pay.

To comply with the new regulations, your employer may choose to do one of three things:

  1. Your employer may begin paying you time-and-a-half for your overtime.
  2. Your employer may raise your salary above $47,476.
  3. Your employer may limit the amount of hours you can work to 40 hours per week, increasing the amount of time you have to spend with family or on additional training.

Importantly, if you currently earn regular bonuses or performance incentives, your employer may choose to use that money to satisfy up to 10 percent of your new overtime pay.

If you are a salaried employee and are not used to keeping track of your hours, you may have questions about how your wages will be paid after December 1. You should seek the advice of counsel to determine whether you are eligible for overtime pay, and when the time comes, whether your employer is compliant with the new rules.

 

OVERTIME OVERHAUL?

PRESIDENT PUSHES FOR REVISIONS TO CURRENT OVERTIME REGULATIONS

Despite the fact that leading corporations have more than doubled their profits since 2009, the New York Times reports that wages for employees working for these companies have remained stagnant. There’s no question that something is amiss in today’s corporate economy when companies are reporting record profits, but the employees charged with bringing in those profits are stuck with recession-level pay.

In an effort to combat this obvious disparity in corporate income and employee compensation, President Obama has directed the Department of Labor to revise its regulations regarding overtime compensation.

For nearly a decade, the Department of Labor has enforced provisions that have been used to keep overtime pay out of the hands of hardworking employees. Of particular concern to the President’s directive is the so-called “executive” exemption, which prohibits certain managerial employees from receiving overtime compensation. While the term “executive” brings to mind high-level supervisors, the executive exemption has often been applied by companies and courts to a number of lower level employees that have relatively little managerial authority.

For an employee to considered an “executive” under the current regulations, four requirements must be met:

(1) The employee must be compensated on a salary basis at a rate of not less than $455 per week ;

(2) The employee’s primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof;

(3) the employee customarily and regularly directs the work of two or more other employees; and

(4) the employee has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.

Apart from the salary requirement, the rest of the requirements are fairly broad, giving employers a large amount of room for interpretation. In particular, the “primary duty” requirement has been the cause of a lot of contention. The Department of Labor and federal courts have classified workers as “executive” employees even in cases where only a fraction of an employee’s duties consist of managerial work.

From the NYT:

“Under current rules, it literally means that you can spend 95 percent of the time sweeping floors and stocking shelves, and if you’re responsible for supervising people 5 percent of the time, you can then be considered executive and be exempt,” said Ross Eisenbrey, a vice president of the Economic Policy Institute, a liberal research organization in Washington.”

Under President Obama’s proposed rules, employees will have to perform a minimum percentage of management-level work before they are exempted from overtime pay. Additionally, the new revisions would raise the minimum amount of pay that would exempt an employee from overtime. As it stands now, a worker being paid $455 a week, or a mere $23,660 a year, can be considered an “executive” employee. The revisions would raise the threshold salary to a much more reasonable figure of $984 a week, or around $51,000 per year.

While these new provisions have yet to be promulgated by the Department of Labor, the President’s public announcement of this directive bodes well for the many workers who have been struggling in the current economy. We’ll keep you updated on this situation as more information becomes available, and will break down how these regulations affect your rights once they’re passed.