The U.S. Department of Labor (DOL) announced proposed revisions to the overtime rules under the Fair Labor Standards Act (FLSA). The revisions would make all salaried workers who earn less than $970 per week, roughly $50,440 per year, automatically eligible to earn overtime pay if they work more than 40 hours a week. The cutoff under existing rules is around $23,660 income per year.
According to the DOL, these overtime regulations were last updated in 2004 and the new regulations are a “critical first step toward ensuring that hard-working Americans are compensated fairly and have a chance to get ahead.”
Key Provisions of the Proposed Rule
The Notice of Proposed Rulemaking (NPRM) focuses primarily on updating the salary and compensation levels needed for white collar workers to be exempt. Specifically, the department proposes to:
- set the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers ($921 per week, or $47,892 annually);
- increase the total annual compensation requirement needed to exempt highly compensated employees (HCEs) to the annualized value of the 90th percentile of weekly earnings of full-time salaried workers ($122,148 annually); and
- establish a mechanism for automatically updating the salary and compensation levels going forward to ensure that they will continue to provide a useful and effective test for exemption.
The DOL claims that “62 percent of full-time salaried workers were eligible for overtime pay in 1975; but today, only 8 percent of full-time salaried workers fall below the salary threshold and are automatically eligible for overtime pay.”
The proposed rule will affect nearly 5 million workers once in effect. The comment period extends to Sept. 4, 2015.