Following up on, "Helping Employees Address Wage and Hour Violations," posted here on August 13, 2015, we wish to examine the potential effects of the controversial update on the rule proposal to the Fair Labor Standards Act ("FLSA"). On September 4, 2015, the Department of Labor ("DOL") closed comments on its proposed update on overtime regulations. With thousands of comments ranging from enthusiastic encouragement to desperate pleads for the DOL to reconsider, people expect the rule to dramatically change the workforce and the business world.
The proposed rule would set the salary threshold needed to exempt employees from overtime pay entitlements at the 40th percentile of earnings for full-time salaried workers. This would have a significant impact, for instance, in 2016, as the current rule's threshold of $455 a week ($23,660 a year) would adjust to a projected $970 a week ($50,440 a year.) As a result, any employee making under $970 a week would be entitled to be paid one and one-half times his or her normal pay rate for work hours exceeding 40 in a workweek. According to the DOL's calculations, that would make 4.66 million workers eligible for overtime when they currently might not be eligible.
The new rule would also call for annual indexing to avoid erosion of the salary threshold. The DOL asked for input on whether the threshold should be indexed to a fixed percentile of earnings or the consumer price index.
The current FLSA rule also includes a duties test, which determines whether a worker is exempt from overtime pay. The test measures whether a worker's duties require advanced knowledge or include managerial or supervisory duties. Advanced knowledge encompasses work that is predominantly intellectual and requires a consistent exercise of discretion and judgment. Managerial or supervisory duties involve independent judgment with respect to matters of significance, such as the ability to hire and fire other workers. If workers' jobs involves such responsibilities, then they are exempt from overtime pay. As of now, however, the proposal did not address the duties test.
The legal team at Shepherd, Finkelman, Miller & Shah, LLP ("SFMS") has significant experience litigating employment matters. If you have any questions regarding this subject or this posting, please contact Valerie Chang (firstname.lastname@example.org) or Alec Berin (email@example.com). We can also be reached toll-free at (866) 540-5505.
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Cinquegrani, Gayle. "DOL Receives Huge Response to Proposed Overtime Rule." Bloomberg BNA. Last modified September 10, 2015.