The U.S. Department of labor has proposed an update to the Fair Labor Standards Act’s minimum wage policy that would affect nearly 5 million workers in 2016. The purpose of the policy is to require employers to pay their employees overtime rates for any hours worked over 40 per week.
There is, however, a “White Collar” exemption to the rules that does not require employees in non-manual labor position to be required to be paid an overtime rate if they worked past 40 hours. The exemption has not been updated since 2004 and has since become so outdated that there are still people being paid below the poverty line and not receiving any benefits from the policy. The exemption was originally put in place to not burden an employer by forcing them to pay overtime on a highly paid executives and managers.
Currently, any “white collar” worker making more than $455 per week ($23,660/year) would not need to be paid overtime for hours worked over 40 per week. In order for an employer to not have to pay a salaried employee overtime, the employee must meet three requirements:
- The employee must be paid on a fixed salary that cannot be lowered during the year
- The employee must be paid more than $455 per week or $23,660 annually, AND
- The employee’s job duties have to primarily be executive, administrative, and/or professional in nature
The newly proposed rule, which will be open to comments until September 4, 2015, seeks to raise the salary level requirement for exemption from $23,660 annually to $47,892 annually ($921 per week) and also raise the threshold for “highly compensated employees” to $122,148 annually. That means that any worker who makes an annual fixed salary of less than $47,892 will be required to be paid an overtime rate of no less than 1 and a half times their standard rate for any hours worked over 40 per week.
This is great news for low paid employees who have been overworked with little to no extra compensation, not so good news for construction companies who relied on giving employees a low salary to keep bids down. Owners can probably expect to see some increase in project costs if these projects take place.
It may cost employers a little extra money, but, is that such a bad thing when it could help 5 million overworked, underpaid people?
Notice of Proposed Rulemaking: Overtime | US Department of Labor