Many people are unaware that certain salaried employees – like hourly employees – are entitled to overtime pay for time worked in excess of 40 hours per week. But the minimum salary that makes salaried workers eligible for overtime is the subject of political tension.
In 2016, with guidance from the Obama White House, the U.S. Department of Labor (DOL) proposed a rule change under Fair Labor Standards Act (FLSA) that would have raised the salary limit from $23,660 per year to $47,476 per year. In other words, to qualify for the FLSA’s white-collar overtime exemption, salaried employees earning less than $47,476 would be eligible for time-and-an-half for any work beyond 40 hours each week. Not unexpectedly, employers across the country objected to the increase, resulting in lawsuits to challenge the rule change. A federal court in Texas issued an injunction in November 2016, blocking the increase while litigation continued.
A new year brought a new administration, and in June 2017, the DOL’s Wage & Hour Division submitted a Request for Information (RFI) to the Office of Management & Budget to give employers, workers, attorneys, and others the opportunities to offer comments regarding the proposed rule change and its impact.
That 60-day comment period ended on September 25, 2017, with input on the overtime increase from more than 165,000 sources. Although there was a consensus among commentators that DOL had the authority to establish the salary threshold (authority that the federal Texas court questioned when issuing the November 2016 injunction), there was broad disagreement regarding the actual minimum salary amount. Many argued that the rate should remain at the 2004 figure of $23,660, others asserted that the 2004 rate was outdated and inadequate, and still others suggested that the threshold should be adjusted annually consistent with inflation.
The debate boils down to two methodologies. The first calls for a “duty-based” analysis of employees’ job responsibilities to determine their eligibility for overtime compensation. Alternatively, the second calls for a clear-cut salary requirement, which proponents claim would be easier to administer and enforce, far less ambiguous as there would be no need to interpret the nature of an employee’s work, and delivering more consistency across the board.
One result of the comment period was clear – the majority of commenters seemed in agreement that a single minimum salary level should be implemented, not a range of thresholds based on geographic location or other variables. Such a system would cause certain confusion given work-from-home arrangements, telecommuting and “hoteling,” multiple job sites, and changing definitions of the workplace.
The debate continues, though its importance for so many Americans is not in dispute. We will continue to monitor developments on the overtime rule change and report back in future posts.
