Millions More Workers May Be Eligible for Overtime; Are You One of Them?

New proposed federal OT regulations make it harder for employers to game the system

Good news for American workers: It may soon be easier for certain salaried employees to get overtime. In fact, starting in 2016, about five million more workers may be able to avoid the executive, administrative, and professional exemptions from overtime (the main so-called “white collar” exemptions), according to the Department of Labor (DOL).

We’ll talk about who might be getting a better payday in just a minute. But first let’s acknowledge that these changes were a long time coming.

Outdated Regulations

Why are these changes a good thing? It’s simple. The DOL has not been regularly re-adjusting overtime regulations to keep pace with inflation. That means that with every cost-of-living increase, more workers have been shortchanged.

The numbers tell the story. Under the current system:

Once a salaried worker whose job duties meet certain requirements makes more than $455 per week, he or she is no longer eligible for overtime. If you do the math, you see that $455 per week equals an annual salary of $23,660 per year. The federal poverty line for a family of four is $24,250.

Today only 8% of salaried workers earn more than the current salary threshold for overtime; in 1975, 62% of salaried workers earned more than the overtime salary threshold then in place.

There are additional problems with the current system as well. As we’ve discussed in previous posts, employers often use the so-called “white collar” exemptions to deny employees overtime.  One of these is the “executive” exemption, which has allowed employers to generally exempt employees from overtime as long as they undertake certain managerial duties.

Here’s an example of why that can be a problem:

A store employee might have been ineligible for overtime because she was considered part of the management team – in that she was authorized to hire, fire, and/or discipline other employees – even though she spent a large part of her day ringing up customers and stocking shelves.

Although she worked 50-70 hours per week, she didn’t receive time-and-a-half. With every hour she worked over 40 hours, her average hourly pay decreased. Meanwhile, other store employees effectively had a higher hourly rate than the “manager” because they worked fewer hours or got overtime.

Updated Rules

So what has changed?

Last year, President Obama ordered the DOL to update the threshold for overtime pay.

The DOL just issued a proposed rule that does exactly that. (Note that the rule is considered “proposed” until after the public comment period has expired, which will occur in September 2015. It’s expected that the final rule will be issued around that time.)

The new rule nearly doubles the threshold for overtime exemption for salaried workers. That means that employees making less than $970 a week, or $50,440 annually, will be eligible for time-and-a-half for any hours worked over 40 hours per week.

This new threshold comes close to where overtime limits would have been had they kept pace with inflation. The rule also includes automatic adjustments of salary and compensation levels to keep pace with the economy.

As for the “white collar” exemptions, the DOL has specifically asked for comments from the public about whether this rule is effective or if it’s being abused. (If you’d like to submit a comment, you can do so here until September 4, 2015.)

The DOL estimates that this rule change will affect over 5 million white collar workers beginning in 2016.

Contact Murphy Law for a Free Consultation

If you believe you’ve been unfairly denied overtime, it’s best to speak to an attorney.

Email us at murphy@phillyemploymentlawyer.com, or call (267) 273-1054 for a free consultation.