Proposed Rule Will Dramatically Increase The Number of Employees Eligible For Overtime

Published by Meg Vergeront on

Currently, employers cannot classify positions as exempt from federal overtime rules unless they pay workers in those positions a minimum annual salary of at least $23,660.[1]  President Obama has directed the federal Department of Labor to change that.  On June 29, 2015, President Obama announced a proposed rule that would expand the number of employees eligible for overtime by requiring employers to more than double the current minimum annual salary requirement to $50,440.  If an employer pays a lesser annual salary, an otherwise overtime-exempt position would no longer be exempt.   

Democrats have hailed the proposed rule as providing fair wages to hard-working employees.  Republicans and business groups contend that it will cost jobs.

The rule is expected to be completed in 2016, although implementation of the rule is not a certainty.  Congress can act to block the rule, and it is likely that opponents to the rule will challenge it in court.  Many economists expect that the rule, if implemented, would induce employers to reduce the work hours of employees who lose the overtime exemption and it is likely result in more employers paying a lower base wage to ensure that they do not end up paying more than paid in salary prior to an employee losing the exemption. 

Check this blog regularly for updates on the progress of the rule and timing of implementation if it is adopted. 

[1]           Note:  the minimum salary requirement is only one of many factors that go into determining whether a position is exempt from overtime.  The minimum salary is a necessary, but not sufficient, requirement.

Filed Under: employment law, exempt employees, federal overtime rules

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