More Salaried Workers to Be Eligible for Overtime Pay

Obama administration to announce doubling of overtime salary threshold to $50,440.

July 01, 2015

WASHINGTON – Tomorrow, President Obama is expected to formally announce a new rule from the Department of Labor (DOL), raising the salary threshold under which employees must be paid overtime rates for hours worked. Currently, that salary threshold is $455 per week or $23,660 per year. The proposed DOL rule would dramatically increase that amount to a number equal to the 40th percentile of weekly earnings for full-time salaried workers – currently $970 per week or $50,440 annually. The threshold would then automatically adjust to stay at that 40th percentile number as wages change over time. 

The updated figures come as a result of President Obama’s 2014 directive requiring to the DOL to review the provisions of the Fair Labor Standards Act that govern the federal regulation of overtime pay. These rules, last updated in 2004, set a salary threshold under which employees must be paid overtime rates for hours worked beyond 40 per week and outline a “standard duties test” that governs what exempt employees (those making over that threshold) are able to do as part of their jobs in order to still be exempt. 

Importantly for c-store operators, the DOL is not currently proposing any changes to the standard duties test for exempt employees but rather is asking the public for input on on whether they should be changed and how.  The fact that the salary threshold will more than double is concerning for our industry, though it is not without precedent. When the Bush administration DOL updated the rules in 2004, the rate had been only $155 per week or $8,060 annually, dating back to the 1970s. The 2004 updates also tightened the exemptions for those making less than $100,000, but loosened them for “highly compensated professionals” making above that six-figure mark.  The Obama proposal would increase this threshold as well, to roughly $122,000 a year. 

The new proposal is expected to be formally published on Thursday when the president delivers a speech in LaCrosse, Wisconsin. That publication will kick off a formal 60-day comment period where the public may share their thoughts on the proposal with the DOL and the White House. The administration’s goal seems to be to ensure that the new rules go into place before the president leaves office in January 2017, although they do expect the final rule to be challenged in court.  Congress can be expected to weigh in with its opinion on the rule but has no direct authority to change the rules without enacting a new statute that would require a presidential signature. 

For more information on how this new rule could affect your employees and your business, please read this analysis from Fisher & Phillips LLP. The entire DOL proposal is also available here.

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