Are Millions of Americans About to Get a Raise? Understanding the Proposed New Overtime Rule

Are Millions of Americans About to Get a Raise? Understanding the Proposed New Overtime Rule

This blog post contains updates as of 3/24/16

**New** Notice of Proposed Rulemaking: Overtime

NOTICE OF PROPOSED RULEMAKING: OVERTIME

Business owners and HR professionals alike are contemplating the possible changes to overtime wages in light of a proposed new overtime pay protection rule.

“The overtime and minimum wage rules are set in the Fair Labor Standards Act, originally passed by Congress in 1938, and apply broadly to private-sector workers. However, there are some exceptions to these rules, which the Department of Labor has the authority to define through regulation. One of the most commonly used exemptions is for “executive, administrative and professional” employees, the so-called “white collar” exemption.” (www.whitehouse.gov)

In a Presidential Memorandum from March 2014, the objective was to reward hard work by strengthening overtime protections. The President instructed the Secretary of Labor to address “overtime pay protections to help make sure millions of workers are paid a fair wage for a hard day’s work and rules are simplified for employers and workers alike.” (www.whitehouse.gov)

Details of the Presidential Memorandum

The Presidential Memorandum instructs the Secretary of Labor to update regulations regarding who qualifies for overtime protection. In so doing, the Secretary shall consider how the regulations could be revised to:

  • Update existing protections in keeping with the intention of the Fair Labor Standards Act.
  • Address the changing nature of the American workplace.
  • Simplify the overtime rules to make them easier for both workers and businesses to understand and apply. (www.whitehouse.gov)

This proposed new rule was sent to the Office of Management and Budget (OMB) on 5/5/15. OMB review can typically take 4-6 weeks,

“Currently, if you make more than $23,660 a year, your employer is under no obligation to pay you the standardized overtime rate of 1.5 times regular pay for working more than 40 hours a week.”

Source: www.mic.com

Shrinking of White Collar Exemptions

The overtime exception was originally meant for high-paid, white collar employers. This threshold has only been raised twice in 40 years. This exception now covers workers that earn as little as $23,660 per year.. Those that fall into this range can be seen in the fast food industry, department store managers, office workers, mini-mart managers, and a multitude of others. It is not uncommon in the aforementioned positions for workers to exceed a 5o+ hour work week; thus putting these workers into the category of earning less than the minimum wage.

The states of California and New York have already stepped in to raise the minimum threshold for this white collar exemption.

Will Employers Find Ways to Lower Labor Costs?

Economic Policy Institute

 

Many experts in the industry feel that employers will most likely hire part-time, lower wage workers to counteract the proposed overtime rule. The adjustment of the proposed overtime rule is different from the current minimum wage debate in that the Obama administration does not need the approval of Congress to increase the pay threshold. The Department of Labor does not need outside approval to update the proposed overtime rule. How this proposed rule will affect workers and their salaries can be seen in the graphic to the left. Source: Economic Policy Institute

 

 

Helpful Links on Overtime Protections and the Proposed Overtime Rule

DOL WAGE AND HOUR DIVISION

PRESIDENTIAL MEMO

FACT SHEET

Detailed articles on this subject from SHRM: Obama Proposes Shrinking White-Collar Exemptions and Proposed Overtime Rule Advances to OMB Review

HR Compliance, HR Management & Consulting

  • Does your business know how to respond?
  • Do you need assistance in drafting a notice to your employees once this rule comes out?

Our exceptional HR Management Solutions are designed to provide complete and continuous HR compliance, guidance, employee cultivation, training and administration. Gain peace of mind, knowing that your unique human resources needs are being taken care of accurately, by your team of HR experts at FosterThomas HR.

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