Changes to Overtime Pay Rules Proposed by the Department of Labor

Payroll Services Personnel

President Obama directed the U.S. Department of Labor (DOL) to review and update the current rules for overtime pay governed by the Fair Labor Standards Act (FLSA). The President asked for the review and amendments to the overtime rules so they more closely reflect their original intent.   In addition, his directive also intended to simplify the rules for workers and businesses to understand and apply.

After months of review, the DOL published the following proposal on June 30:

  • Raise the threshold for most salaried workers to receive guaranteed overtime to equal the 40th percentile of weekly earnings for full-time salaried employees.  Under the DOL proposal, this would raise the salary threshold from $455 a week or $23,660 a year to a projected level of $970 a week or $50,440 per year.
  • Expand overtime pay and minimum wage to approximately 5 million workers.
  • Provide clarity to workers and employers so they can easily determine overtime pay eligibility.
  • Apply standards that automatically update salary thresholds based on inflation or wage growth over time

During a 60-day comment period, the DOL will gather feedback from businesses, employees, unions, and other interested parties.   After the comment period, the DOL will finalize the proposed rule changes sometime next year only after reviewing and considering all the comments.

Today, it is difficult to predict what elements of the proposal will take effect in 2016 or beyond.    In the meantime, businesses should analyze current employee classifications to understand how the proposed changes could affect overtime pay and future profitability.  Our professionals are available to assist with that analysis and make recommendations so your business will succeed regardless of the final rule changes.  Contact us today.

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