July 26, 2016

Over Four Million Salaried Employees Becoming Eligible for Overtime Pay

As reported in USA Today, the U.S. Department of Labor (DOL) has finalized a new rule that raises the salary threshold at which white-collar workers are exempt from overtime pay from $23,660 to $47,476.  An estimated 4.2 million executive, administrative, and professional workers whose salaries fall within that range will now be entitled to overtime pay.  The rule will take effect December 1, 2016.  The salary threshold will be updated every three years and will rise to $51,000 on January 1, 2020.

The rule clarifies the duties white-collar workers must perform in order to be exempt from overtime pay (e.g., "administrative" duties involve exercising discretion and independent judgment).  If a salaried employee makes more than $47,476 but does not perform the duties required to be exempt, he or she is still eligible for overtime pay.  Labor Secretary Thomas Perez estimates that an additional 8.9 million workers would become eligible for overtime pay if their jobs were properly classified.

Employers can comply with the rule by (1) starting to pay overtime, (2) raising employees’ salaries to the new threshold to avoid paying overtime, (3) instructing employees not to work more than 40 hours a week, or (4) cutting employees’ base pay to offset the new overtime payments.

Visit DOL’s website for more information.