New regulations from the Department of Labor will expand the number of U.S. workers eligible for overtime pay.
Under the 1938 Fair Labor Standards Act, a worker who earns below an annual salary threshold set by the department must receive overtime. The current level is $23,660.
The proposed rule is expected to double the threshold to somewhere between $45,000 and $52,000 per year, making an additional five to 10 million workers eligible for overtime pay.
In addition to the salary level threshold, employers can also use an employee’s primary duties to determine exempt or non-exempt status. Time spent on exempt duties, which typically require discretion and independent judgment, are used as a guidelines but do not always definitively determine exempt status — except in California, where more than 50 percent of an employee’s time must be spent on overtime-exempt duties each week for the position to be classifiable as exempt.
The new federal regulations are expected to be similar to California’s.
Tammy McCutchen, former administrator of the Department of Labor’s Wage and Hour Division under President George W. Bush, observed that “If the regs include a $50,000 salary level threshold plus a 50 percent primary duties test, the result may be to strictly curtail those who supervise and simultaneously perform other work,” thus increasing the number of employees eligible for overtime pay.
If the regulations include a “California-style” job duties measure, there may be significant workplace disruptions, McCutchen added. As an example, McCutchen noted it could mean “ordering exempts to stay away from the copier,” to prevent them from spending too much time on nonexempt duties.
She also cautioned that assistant managers who check customers out at the cash register during busy times could be banned from doing so rather than risk performing nonexempt duties, “and they shouldn’t even think about helping out with inventory.”
According to McCutchen, new regulation may “send litigation into overdrive, as in California, where employers who are sued face tremendous pressure to settle and reclassify.” She noted that many employers may find it easier to “go nonexempt” and pay overtime to nearly their entire workforce.
Congressional Republicans have described the proposed regulations as “job-killers.” Sen. Lamar Alexander (R-Tenn.), chairman of the Senate Health, Education, Labor and Pensions committee, said the rule “seems engineered to make it as unappealing as possible to be an employer creating jobs in this country.”
According to the Department of Labor, proposed rules will be issued soon, as early as this week. Stay tuned to SAF for updates.