As we have written in this publication on numerous occasions, the Obama Administration has been working on new regulations that would result in more workers being eligible for overtime pay. On May 18, President Obama announced the Department of Labor’s (DOL) rule updating the overtime regulations under the Fair Labor Standards Act (FLSA). This new rule raises the minimum salary amount required to be exempt from overtime pay from $23,660 to $47,476 and it will take effect on Dec. 1, 2016. When the DOL published the proposed rule on July 6, 2015, the Department received 270,000 comments in response. After those comments, the DOL announced this new rule, which, as expected, has instigated a strong split of opinion.
It should be noted that the FLSA has narrow exceptions for corporations who don’t want to pay their employees overtime. In order to meet one of those exceptions, certain tests or criteria have to be met. One of these tests is the “salary-level test,” and it’s this test that has been changed. The basic rule is employers must pay employees a minimum salary in order for an employee to fall within the exception.
The concept behind this rule is this: if the employee holds a high level position, then they have the bargaining power to ensure they do not work excessive hours without being properly compensated for their work. Until Dec. 1, 2016, this minimum salary will remain $23,660; however, after that date this minimum salary will be raised to $47,476. This increase, according to the Washington Post, will cause “[a]bout 35 percent of full-time salaried employees [to] be eligible for time-and-a-half when they work extra hours…[which is] up significantly from the 7 percent who qualify under the current threshold.”
Some believe, as does Jared Bernstein, a former chief economist for Vice President Biden,that “this is one of the most important measures that the Obama administration has implemented to help middle-wage workers.” However, others believe the change will have a large negative impact on small businesses and educational institutions. Linda Harig, Vice President of Human Resources for the University of Tennessee, said, “We agree that there needs to be a change. But we believe due diligence has not been done on the impact for higher education.”
The impact of this new rule is yet to be seen; however, it does have the potential to boost worker’s wages by $12 billion over the next 10 years. Additionally, with the new threshold requirement being updated every three years, to compensate for inflation, we could see the minimum salary requirement reach $51,000 by 2020. If you need additional information on this subject, contact Roman Shaul, a lawyer in our firm’s Consumer Fraud and Commercial Litigation Section, at 800-898-2034 or by email at Roman.Shaul@beasleyallen.com.
Source: Washington Post
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