Get Ready for New Overtime Rules -- Millions More Will Be Covered
Get ready for expanded overtime. In the upcoming month, the Department of Labor is expected to release new Fair Labor Standards Act rules which are expected to greatly expand the number of employees eligible for overtime. The FLSA requires that employees who work more than 40 hours a week be paid time and a half for any overtime.
For decades, that overtime requirement has been applicable only for lower-paid employees. Under the new rules, the salary cap will go up, allowing millions of salaried workers to qualify for overtime for the first time. GCs should be ready for the change.
Goodbye Old Overtime Rules
For years, no one has needed to reconsider who qualifies for overtime. Generations of GCs have come and gone since the rule was last updated in 1975. For the past 40 years, only salaried employees making $23,660 or less per year, or $455 a week, were eligible for overtime pay. When that threshold was set, it covered most workers. Sixty percent of the salaried workforce could get overtime in 1975, according to The New York Times. Wages and inflation have increased, but that ceiling has remained. Today, only eight percent of salaried workers get overtime.
Now, the Department of Labor is finally ready to raise that cap. That's great news for employees, but it's worrisome to many employers who will have to strictly limit workers' hours or face increased overtime costs.
Who Will Be Covered Under the New Rules?
Here's where the difficult part comes in. It's hard for businesses to start planning for the overtime increase because the new salary cap hasn't been announced. Indeed, the DOL was instructed in 2013 to start expanding coverage and was expected to release its proposed changes this March. That date has come and gone, but in May, Labor Secretary Thomas Perez announced on his blog that the proposed rules are done and awaiting review by the Office of Management and Budget.
How high will the salary cap go? Some predict that it will increase to $42,000, which is almost double the current amount. Thirty congressional Democrats want an even higher cap -- they called for an increase to $69,000. Either increase would more than double the amount of eligible workers.
Exemptions Could Be Tightened as Well
Speaking of eligibility, the rules will likely change which employees are exempt from overtime regardless of pay. Currently, professionals, management, and others are exempt from overtime rules, regardless of their salary. The new rules could require that workers be devoted to management tasks for more than half their hours in order to qualify for those exemptions.
So, get ready, GCs -- after 40 years of settled practice, things are about to change.
- Why Your Overtime Expenses Are About to Skyrocket (Inc. Magazine)
- 3 Common Legal Issues When Paying Employees by Commission (FindLaw's In House)
- When Is a 'Highly Compensated' Employee Entitled to Overtime? (FindLaw's In House)
- Rite Aid Settlement: A Lesson in FLSA Overtime Laws (FindLaw's In House)