On July 6, 2015, the Department of Labor proposed changes to the manner in which overtime pay is calculated for executive, administrative and professional employees. These employees, collectively referred to as white collar workers, have been exempt from overtime pay protections for many years. To be considered exempt, the employees must meet certain minimum tests related to their primary job duties and be paid on a salary basis at not less than $455 a week ($23,660 a year), which amount was last updated in 2004.
Now, the Department of Labor proposes to update that salary level to $921 a week or $47,892 annually. These amounts represent calculations based on 2013 statistics; the adjusted levels as projected for 2016 would be $970 a week or $50,440 per year.
These changes are to the rules interpreting the exemptions under the Fair Labor Standards Act and can be enacted and approved without Congressional action. However, there is a 60-day comment period (through September 4, 2015) during which individuals, corporations and other organizations can express opinions which could result in changes to the rule that is ultimately adopted. It is not clear whether or when these proposed changes will become effective, and what actions opponents will take to try to block implementation. Because these are regulations under the FLSA, not the statute itself, these rules will not be voted on by Congress.
If the rule is adopted and a worker would otherwise meet the definition of an executive, administrative or professional employee but earns less than $47,892 per year, that employee would have to be paid time and a half for hours worked over 40 per week. In addition, in order to prevent the salary level requirements from becoming outdated, the Department of Labor proposes to automatically update the minimum salary levels on an annual basis.
The Department of Labor estimates that the change will clarify the overtime requirements for approximately 11,000,000 workers who earn below the proposed salary threshold, including almost 5,000,000 white collar workers who will become newly entitled to overtime protection because of the increase in the salary threshold. There is no small business exemption from the Fair Labor Standards Act or this proposed overtime rule.
It depends on your perspective as to whether this will be a beneficial change. Sectors projected to be most affected include the restaurant industry. Workers may find that their overtime hours are more restricted, or if they are earning just under the new threshold of $50,444, that their salary will be bumped up so that they remain exempt and the employer will not be required to pay overtime. Or in order to maintain the bottom line, employers may be imposing layoffs.
Although no comparable change has been proposed under Pennsylvania Wage and Hour laws, in determining which law, Pennsylvania or federal, applies, the rule is that whichever is the most stringent governs. Accordingly, if the revised federal overtime rules are adopted, they will be applicable to all Pennsylvania employers and employees. Additional information is available from the Department of Labor, particularly the overview set forth in this fact sheet.