Benefits Insights, Fall 2015
The U.S. Department of Labor Wage and Hour Division published a proposed update to the Fair Labor Standards Act (FLSA) regulation, which defines executive, administrative, professional, outside sales, and computer employees for overtime purposes. The Notice of Proposed Rulemaking (NPRM) extends overtime protections and would guarantee overtime pay to most salaried workers earning less than the newly proposed threshold of $50,440.
The NPRM implements a memorandum issued by President Obama more than a year ago to increase overtime pay. The memorandum directed the DOL to update the regulations defining which white collar workers are eligible to receive pay for hours worked over 40 in a work week.
The NPRM raises the salary threshold that businesses will use to determine whether employees are exempt from being paid overtime. Additionally, it looks to simplify the identification of nonexempt employees and creates a process to automatically update the compensation thresholds.
Under the Fair Labor Standard Act, employees who earn less than the current salary threshold of $23,660 per year are automatically qualified for overtime pay whenever they work more than 40 hours a week. However, the existing threshold is below poverty level for a family of four and has been eroded by inflation over the years, leaving a large percentage of workers that are “exempt” from earning overtime pay.
The NPRM changes the Fair Labor Standards Act’s regulation to better reflect the intent of the FLSA regulation and align the proposed threshold with the 40th percentile of weekly earnings for full-time salaried workers. This is meant to promote higher take-home pay and allow workers to better balance work and family obligations.
The NPRM was published on July 6, 2015 in the Federal Register (80 FR 38515) and interested parties were invited to submit written comments on or before Sept. 4, 2015. It is unclear when a final rule will be published.