On Monday night, details of the revised white-collar overtime regulations were released. But we’ll know more once the actual details get posted on the Department of Labor website on Tuesday. (Bloomberg was the first to report it Monday evening.)
(Update 6/30/15: The proposed regulations are now available online from the U.S. Department of Labor here.)
As you may know, in order to be exempt from overtime, typically two tests must be met: a “salary” test and a “duties” test. Employees who are paid below that threshold must be paid overtime even if the “duties” test is met.
But in recent years, the salary test has been very easy to meet. Enter the proposed changes to the regulations.
Among the details released tonight:
- The regulations will raise the salary threshold from $23,660 per year to $50,440 – nearly $1000 a week ($970 a week if you’re really particular).
- This threshold will not be linked to inflation but, according to Politico, will be tied to the 40 percentile of income (meaning, in essence, that 40 percent of the working population should be eligible for overtime pay)
- Importantly, the regulations will NOT include changes to the duties test. Instead, it “solicits questions from the public about how best to alter it. As in the past, the new threshold will not affect teachers, lawyers, doctors and judges, who are all automatically exempt from overtime.”
What this means practically is that employers who have employees making less than $50k, need to review their practices now to see who may be impacted by these new regulations.
But don’t go revising all your policies yet. According to The New York Times, the new rules wouldn’t be implemented until at least 2016 — giving employers many more months to understand the changes.’
Taking advantage of new media, the President released his own op-ed on the subject on the Huffington Post Monday night.
This week, I’ll head to Wisconsin to discuss my plan to extend overtime protections to nearly 5 million workers in 2016, covering all salaried workers making up to about $50,400 next year. That’s good for workers who want fair pay, and it’s good for business owners who are already paying their employees what they deserve — since those who are doing right by their employees are undercut by competitors who aren’t.
That’s how America should do business. In this country, a hard day’s work deserves a fair day’s pay. That’s at the heart of what it means to be middle class in America.
Interestingly, some anticipate that employer will respond to these rules by actually lowering salaries:
Assuming the rule is put in place, economists believe that many employers will most likely reduce workers’ hours so as to save on overtime pay. Even so, the White House believes the rule could affect nearly five million workers in the short term. Meanwhile, any attempt to scale back hours could increase hiring.
Over the longer term, the effect of the rule could diminish substantially as employers offer new hires a lower base wage. This could make their overall pay, including the higher overtime wage, equivalent to what comparable employees make today in the absence of the overtime rule.
Again, we’re anticipating more details when the proposed regulations are now released
as early as Tuesday morning.