President Obama announced a proposed rule that could make salaried workers eligible for overtime pay.[wc_divider style=”dotted” line=”single” margin_top=”” margin_bottom=””]
President Obama announced a proposed rule that he says will eliminate employers’ ability to skirt minimum wage requirements through employee misclassification.
The Fair Labor Standards Act (FLSA) guarantees workers a minimum wage and overtime pay after 40 hours in a workweek – unless a worker is classified as one of the “white collar” executive, administrative, and professional (EAP) categories.
Currently, salaried workers who earn at least $23,660 annually are exempt from overtime pay requirements. The White House issued a proposed rule that would increase the exemption threshold so that only salaried workers earning at least $50,440 per year.
President Obama: Employers Are Misclassifying Workers to Avoid Paying Minimum Wage
In a speech in La Crosse, Wisconsin, the President said:
“They [employers] essentially label someone as management instead of a worker – even if they’re making, like, $25,000 – [and] work them a whole bunch of hours. That’s a way of getting around the minimum wage. It’s not fair.” President Obama, July 2, 2015
Not only did Obama make his stand in the state of Republican Governor and Presidential candidate Scott Walker, he also threw neighboring Minnesota’s funding of education and state minimum wage level in the face of Green Bay Packers fans.
But he also conceded that “nobody does brats like Wisconsin,” a reference to bratwurst, sausages comprised of chopped meat stuffed in tube-shaped intestinal casing.
Which Salaried Workers Are Affected by the Proposed Overtime Rule?
The Department of Labor explained the two types of workers who primarily would be affected by the rule: Type 2 workers who do not regularly work overtime but occasionally work overtime; and Type 3 workers who regularly work overtime. These workers who meet the salary threshold guidelines would become overtime eligible and must be paid the overtime premium for any overtime hours worked.
Although the President estimated that 5 million U.S. workers would be overtime eligible, Politico pointed out that the actual number is closer to 1.2 million after considering the proposed salary threshold and type of salaried worker.
What’s Next for the Proposed Overtime Rule?
The proposed changes will be open for a 60-day comment period and could be enacted through Executive Order without Congressional approval. Based on President Obama’s track record, that means the odds are good that the President will issue another Executive Order as soon as the dust from the public comment period settles. That could be as early as September 2015.
Will the Proposed Overtime Rule Affect the Federal FSLA Posting?
GovDocs Compliance Counsel, Anne Jakala, Esq., has reviewed the Department of Labor’s proposed rule to ensure there is no explicit mention of changes to the FLSA posting language.
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“The FLSA posting is required for all workplaces in the U.S., so any changes would clearly have a huge impact on large employers. The GovDocs Compliance Research Department will continue to monitor the DOL, but at this time, we do not anticipate any changes to the posting.” Anne Jakala, Esq., GovDocs Compliance Counsel
3/14/2014 UPDATE: The President issued a Presidential Memorandum directing the Secretary of Labor to “propose revisions to modernize and streamline the existing [overtime] protections consistent with the intent of the [Fair Labor Standards Act].”
Quoting the Director of the White House Domestic Policy Council, Cecilia Muñoz, a New York Times article indicated that President Obama will issue an executive order to expand coverage of overtime pay to some salaried workers under the Fair Labor Standards Act (FLSA).
Currently, employers in the U.S. are required to pay most non-salaried workers who make less than $455 per week overtime pay at a rate of one-and-a-half times their normal hourly rate for every hour worked beyond forty.
Although few specifics are available prior to the President’s Executive Order, two economic advisors to the President proposed the salary test for exemption be raised from $455 per week to $984 per week, meaning that employees currently classified as exempt who are making a salary of about $50,000 or less would be eligible for overtime pay.
Changes to the regulations will be subject to public comment before final approval by the Department of Labor.
Who is an Exempt Employee?
The word exempt means to be “free from an obligation or liability imposed on others”.
Under the FLSA, certain employees – typically those who perform managerial or supervisory work – are not eligible for overtime pay. These workers are known as “exempt” employees, because their employers are exempted from FLSA requirements relating to the payment of overtime. The exemption is also known as the “white collar exemption” as it often applies to professional or managerial roles.
Under the FLSA, an employee classified as exempt is not eligible for overtime. To qualify for the exempt classification, an employee must earn a salary of at least $455 per week perform exempt job duties in executive, administrative, professional, outside sales, and certain computer employee positions.
Revisions to the FLSA Posting
The proposed expansion of employees eligible for overtime coverage is not likely to affect the FLSA Employee Rights posting language. The existing text is broad enough to allow for increases in the salary threshold of qualifying employees and reads:
Certain occupations and establishments are exempt from the minimum wage and/or overtime pay provisions.