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Government Proposes to Raise Overtime Threshold

The long-running saga of federal rules governing overtime pay took another twist last week when the U.S. Department of Labor (DOL) announced that it would increase the overtime-wage threshold to $35,308 per year from the current $23,660 per year.

The change would mean that workers who make less than $35,000 a year would be considered non-exempt and eligible for overtime pay no matter what their current classification. So, employers with exempt employees earning between $23,660 and $35,308 would need to reclassify them as non-exempt and pay them overtime if warranted or pay them at least $35,308 per year and provide them with sufficient duties to justify classifying them as exempt.

There are no proposed changes in the federal regulations to the white-collar duties test.

If adopted, the higher wage level will significantly increase the number of workers eligible for overtime pay. It does not appear as though the proposal will include any specific duty adjustments, but it remains possible. As part of the rule-making process, the DOL sent the proposal to the White House Office of Management and Budget in mid-January.

There is no clear timetable for when the draft regulation will be released or when it will take effect. Moreover, many groups on both sides of the issue are already talking about possible legal challenges, a process that could delay implementation by months or years.

It has been more than 15 years since the government changed the overtime rules.

Employers should remember in the meantime that paying an employee a salary does not make the employee exempt. Classification is nearly always about the duties.

Any employer questioning if one or more of its employees is currently misclassified or should be reclassified, needs to take the time to review the employee’s current duties to see if they meet the law’s requirements. While there is some degree of nuance in interpretation in deciding whether an employee is exempt, an employer needs to be able to justify its classification if challenged.

DOL has detailed information on its website.

This article also appeared on the AIM blog

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