The Obama Administration is currently weighing new rules on overtime pay to protect more workers with overtime pay rules. The Labor Department has previously stated that the release of the proposed overtime rules would occur in February, but now some policy experts are predicting the release will be pushed back to March or April. Millions of workers across the United States may be impacted by the new rules.
Low salaried managers stand to reap the benefits of the new rules being considered. Low salaried managers often do not qualify for overtime pay under existing rules even though they may routinely work more than 45 hours per week for their employers. A loophole in the current rules have allowed many companies to avoid paying overtime pay to full-time workers making as little as $23,660, about $455 a week, by classifying them as “exempt” salaried employees, rather than classifying them as hourly workers. Exempt positions generally include managers, administrators, and sales employees.
Department of Labor is now expected to propose raising the $23,660 income threshold to somewhere between $42,000 and $52,000 to protect these workers from essentially being taken advantage of by the companies that hired them. The Economic Policy Institute estimates that if the threshold were raised to $42,000, 3.5 million more workers would become eligible for overtime pay. If the threshold rose to $52,000, 6.1 million workers would qualify for overtime pay.
Labor advocates are pushing for the threshold to be raised to at least $51,168, about $984 a week. This would make 47 percent of workers eligible for overtime pay, up from around 12 percent of workers today that are eligible but still not reaching the 1975 figures of 65 percent of American workers eligible for overtime pay.
It is also expected that how “exempt” duties are determined will be amended to reflect the changing employment environment. Today, to classify an employee as an exempt administrative employee, the company must demonstrate that a worker’s primary duty includes “the exercise of discretion and independent judgment with respect to matters of significance.” Labor advocates claim that this statement is too broad, as every job position requires some independent judgment to be exercised during the course of performing tasks for the employer. If the requirement was changed to having at least 51 percent of a worker’s time spent on exempt duties, it would prevent hollow promotions where workers are given managerial titles but little or no managerial duties.
Employers are concerned that the new overtime protections will mean higher payroll costs for businesses of all sizes across the United States. Employees may ultimately suffer if companies decide to hire more low paid workers to cover the extra hours once worked by formerly exempt employees. The U.S. Chamber of Commerce has recommended that the Labor Department apply geographically specific thresholds for the new overtime rules.