Overtime Pay for Executive and Professional Employees – Watch for DOL Announcement
The White House has told us to expect the President to make an announcement later this week regarding changes to and expansion of the overtime pay rights of certain types of workers classified as exempt Professional or Executive employees.
This order could modify the current overtime rules for such workers in a way that extends the right to receive overtime pay to millions of employees who are currently considered “exempt” and not legally entitled to time and a-half for hours worked over 40 per week. This would be a very positive change for the workers affected and a largely unpopular change from the perspective of employers faced with having to pay higher wages.
While the specifics of these regulatory changes are not clear at this point, early reports indicate that one element will be an increase in the minimum weekly salary required to classify certain types of employees as exempt from the labor laws on overtime pay – currently set at $455 per week. The director of the White House Domestic Policy Council was quoted as saying “We need to fix the system so folks working hard are getting compensated fairly. That’s why we are jump-starting this effort.” The changes appear to bring the federal rules closer to the standards used by states such as California when determining if an employee can properly be classified as exempt from the overtime pay laws.
Currently, the test for exemption under federal law hinges upon an employee’s “primary” job duties – not necessarily what the employee spends the majority of their work hours actually doing. We constantly hear about the abusive situations this creates for many workers who spend the vast majority of their time doing the same type of non-exempt work the people they supervise perform, but because their primary job duties (on which they spend minimal time) include supervising or managing others, they are labeled exempt and denied overtime pay. The new regulations may take a more realistic approach (similar to California’s overtime exemption rules) requiring an analysis of how much time the employee actually spends performing exempt duties versus non-exempt duties. Hopefully, the new standard will require that employees classified as exempt actually spend the majority of their time (50%+) performing exempt job duties. This change alone would dramatically improve the fairness of the federal overtime pay laws for millions of American workers.
The increase of the minimum salary required for exempt employees would also be a major step towards insuring fairness in compensation. Some states such as California and New York already have salary thresholds that are higher than the $455 per week under federal law – $640 per week and $600 per week, respectively. The current federal minimum was set in 2004 and has not been adjusted to keep up with inflation. During the same time period, due to labor cutbacks, many of these exempt employees have been required to put in more overtime hours with no additional compensation – further driving down their effective hourly wage.
Stay tuned for the official announcement and further word from the Department of Labor – and maybe even a well deserved raise!
Update: Stating that the executive, administrative and professional exemptions have not evolved and change to keep pace with the modern economy, the President directed the Department of Labor to “…propose revisions to modernize and streamline the existing overtime regulations”. Here is a link to the MEMORANDUM FOR THE SECRETARY OF LABOR
Update: The new rules that would have increased the minimum salary requirement were set to go into effect on 12/1/16 but were delayed by a lawsuit brought by several states. Please see this page for the latest updates.