On June 30, 2015, the Obama Administration unveiled a long-anticipated proposed rule increasing the threshold amount required to be paid to certain salaried workers before they are exempt from receiving overtime. The current rule is that any salaried worker who earns below $455 a week or $23,660 per year (i.e., less than the poverty line for a family of four) must receive overtime. The proposed rule would more than double that to $50,440 (i.e. close to the median household income)—a number that the administration believes would encompass many workers now classified as managers—and would increase automatically in future years.
Under the current rule, the white collar exemption excludes “executive, administrative and professional” employees from receiving overtime pay if they earn over $23,660. The proposed rule seeks to dramatically increase the salary threshold, but leaves open the question whether the duties tests in the current regulations should be revised.
This is quite significant for a rule that has been updated only once since 1975 and is not indexed for inflation. The administration hopes that the proposed change will improve wages for nearly 5 – 10 million people and put an additional $1.2 billion to 1.3 billion “in their pockets.” But, some experts and legislators predict negative effects.
John Boehner’s spokesman was quoted as saying that the new rule “will limit opportunities and increase costs.” Business groups are saying that employers will be forced to cut back on workers’ hours or workers, period. In many instances reducing employees’ hours worked may endanger their eligibility for benefits. The National Retail Foundation said that “most workers would be unlikely to see an increase in take-home pay, the use of part-time workers could increase, and retailers operating in rural states could see a disproportionate impact.”
The rule is expected to be especially tough for small businesses in small markets. According to the senior legal counsel with the National Federation of Independent Business, “Promoting someone to manager is going to be an expensive proposition for many small businesses and the result will be less mobility and fewer opportunities for workers at the bottom.”
If you wish to comment on the proposed rule, comments should be identified by Regulatory Information Number (RIN) 1235-AA11 and submitted electronically through the federal e-rulemaking portal at http://www.regulations.gov or mailed to Mary Ziegler, director of the Division of Regulations, Legislation, and Interpretation at the Wage and Hour Division, U.S. Labor Department, Room S-3502, 200 Constitution Ave., N.W., Washington, D.C. 20210.