Proposed Change May Send More Workers Home with Overtime Pay

Millions of previously exempt workers may soon be eligible to receive overtime pay under a plan proposed by the Obama administration, according to a report in CNN Money. The White House is set to announce the proposal in the coming months of the year, which will aim to modify the Fair Labor Standards Act (FLSA), a federal statute that regulates overtime pay. Specifically, the plan will address the threshold of exemption, both in terms of salary and duties.

Increased Salary Threshold

As of now, under the guidelines provided by the FLSA, employees may be considered exempt from overtime pay if they receive at least $455 a week. As such, this means that certain professionals making anything over $23,660 per year could be deemed ineligible to receive overtime pay, regardless of the number of hours they work in a given week.
The plan proposed by the Obama administration would most likely raise this threshold to somewhere between $42,000 and $52,000 per year, or $807 and $1,000 per week.

Clarification of Exemption Duties

In addition to increasing the salary threshold for exempt workers, the plan proposed by the Obama administration would help clarify exempt duties, as well. Currently, the FLSA declares that in order for an employee to be exempt from overtime pay, his or her primary duty must require advanced knowledge, be intellectual in character, and include work that requires the “consistent exercise of discretion and judgment.” This determination provides ample leeway for employers to exempt employees; in fact, Judi Conti, the federal advocacy coordinator of the National Employment Law Project (NELP), claims that these guidelines are “meaningless,” and would rather have the Department of Labor require that more than half of an employee’s time be spent on exempt duties before the employee is deemed ineligible for overtime pay.

Possible Results of the Proposed Plan

Of course, if the salary threshold were raised as described above, it would allow an additional 3 to 6 million workers across the country access to overtime pay. Both the NELP and the Economic Policy Institute (EPI) advocate for a threshold of $51,168 per year, which would provide overtime eligibility for 47 percent of workers nationwide, up from the 12 percent that qualify today.

With such benefits for workers, however, could come potential downfalls; for example, this threshold modification would require many employers to reclassify their employees as hourly instead of salaried, which could cause the workers to be denied certain benefits. Furthermore, worker morale could fall among those who are reclassified under the guidelines of the plan; while salaried employees have greater ability to create their own schedule, hourly employees must often adhere to the strict timelines of their employers.

The Department of Labor marked February as the release of the plan, although many observers believe it could come months later. And ultimately, this change in overtime regulations could have a significant impact on both employers and employees throughout the nation. If you have questions about how the plan may affect you in the future or about overtime pay in general, reach out to an employment law attorney for help.