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It’s About Time: The DOL Proposes Expansion of Federal Overtime Coverage

August 17, 2015 by

And now for a long-overdue development in federal overtime law:  at President Obama’s direction, the Department of Labor issued a Notice of Proposed Rulemaking on July 6, 2015 to expand overtime protection to millions of workers.  The proposed rule would raise the salary threshold to qualify for the federal “white collar” exemptions from overtime pay for executive, administrative and professional employees.

To be exempt from federal overtime rules, employees must satisfy a two-part test. First, the employee’s salary must be above a certain threshold.  Second, the employee must satisfy the “primary duty” test for whichever exemption applies.  So, all employees paid less than the salary threshold are entitled to overtime, irrespective of the sort of work performed.  Additionally, an employee earning a salary over the threshold is exempt from overtime pay only if he or she meets job duties tests for the various exemptions.

The exemption was intended to apply to higher-paid employees; however the salary threshold to qualify for the exemption has remained remarkably low.  A common and frequently cited example of this problem is the retail store supervisor who earns wages below the poverty line and yet remains exempt from overtime as a “white collar” employee.  The current threshold for salaried workers is $23,600, which means that an exempt employee can work 50-60 hours per week, receive no overtime, and still be below the federal poverty line for a family of four.

The proposed rule would increase the salary threshold to qualify for the overtime exemption from the current $455 per week ($23,600 annually) to $921 per week ($50,440 annually) in 2016.  The proposal would also permit the Department to annually update the salary level, avoiding a similar problem in the future.  As the AFL-CIO’s President Richard Trumka pointed out recently, expanding overtime protection creates jobs, as it encourages employers to either compensate employees for more hours worked, or hire additional workers to cover excess hours.

The proposed rule will offer greater overtime protection for California employees. California’s exemption tracks the federal job duties test, but currently has a higher salary threshold.  The California salary threshold is currently $720 per week, or $37,440 annually.  (The threshold will rise to $800 per week or $41,600 annually, on January 1, 2016.)  But the proposed federal threshold is higher than this, creating the unusual circumstance where federal employment law could give greater protection than California law.

The public will now have 60 days to comment on the proposed rules, and the Department may adopt a modified version for its final rule, which will not go into effect until 2016.

 Click here for more on the Department of Labor’s overtime initiative.

 Click here for AFL-CIO President Richard Trumka on the proposed rule.

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