Things are looking up for low-to mid-wage workers who are paid a salary and thus do not receive overtime pay. The United States Department of Labor is planning to greatly expand the ranks of workers who are eligible for overtime. President Barack Obama announced this development in an op-ed piece this week, “A Hard Day’s Work Deserves a Fair Day’s Pay,” (https://www.huffingtonpost.com/barack-obama/a-hard-days-work-deserves-a-fair-days-pay_b_7691922.html).
The Fair Labor Standards Act of 1938 (FLSA) sets out standards for both minimum wage and overtime wages. Workers who are paid an hourly rate must be paid one and one-half times that hourly rate for each hour over forty hours they work in a given week. So, an employee who earns $8.38 per hour, which is the minimum wage in New Jersey, and works fifty hours per week, must be paid that rate for the first forty hours, or $335.20, plus $12.57 per hour for the additional ten hours, or $125.70, for a total of $460.90 for the week.
However, many workers are not eligible for overtime pay. These individuals receive the same amount of pay, whether or not they work more than forty hours per week. This is because the FLSA makes several categories of employees exempt from overtime. Some of these exemptions are known as the “white-collar” exemptions, which cover executive, administrative, professional, and outside sales employees. For these employees to be exempt from overtime, their jobs must meet both a salary test and a duties test. Presently, employees who are paid at least $455 per week and whose job duties meet specific criteria, are exempt from both minimum wage and overtime regulations.
But this amount, $455/week, or $23,660/year, has not increased in several years. When the FLSA was enacted, the weekly salary threshold was set at a level received by well-paid workers, and was at about the 40th percentile of full-time salaried workers. But $455/week is nowhere near the present 40th percentile of full-time salaried workers. The salary threshold will be more than doubled, to around $50,400/year, under the Department of Labor’s proposal, which it announced June 30. Interested parties can submit written comments on the proposal, which is expected to go into effect in 2016. Another important aspect of the proposal is an automatic annual adjustment, using either the consumer price index or national wages.
It is important to note that, even though many more workers should soon be eligible for overtime pay, this does not mean that all those workers will receive overtime pay. Many employers will likely cap some employees’ hours at forty per week, rather than pay time and a half. But this proposal is definitely good news for employees: some will now be paid the overtime they deserve; others will be paid the same amount they have been paid per week, but be limited to forty hours per week, leaving them time to spend at home or working another job; still others will be hired into new jobs created by employers who cap their employees’ hours at forty per week.
By Jennifer Vorih, Esq. and Ty Hyderally, Esq.