The Department of Labor recently put forth a landmark rule which would extend and improve overtime protections to almost five million white collar workers across the nation. These protections would snap into place in the first year of the rule’s regulation and will close an important loophole for those making under $25,000 a year. This Notice of Proposed Rulemaking was published on July 6 2015, and comments were taken until September 4, 2015. The DOL is expected to present the regulations this month.
Closing the Loophole
Originally, overtime eligibility exceptions were designed for executive and professional workers who were very highly compensated and whose jobs kept them working non-traditional hours. Unfortunately, loopholes in the law have left lower-level office workers, clerks, assistant managers and other workers who make near or below the poverty level out in the cold.
Some of these jobs require work at 50 to 60 hours a week or more — in certain cases even up to 80 — without any overtime protection. Such jobs often pull in less than poverty level for a family of four. Closing this loophole will potentially allow such employees to get a step ahead via fair compensation for their work.
Fair Pay for Fair Work
The new plan, put forth by President Obama and proposed by the DOL, will extend overtime protections to five million workers in 2016, and will cover all workers making up to about $50,500. Such workers will be guaranteed overtime rather than being trapped in “salary exempt” jobs that allow employers to take advantage of salaried positions to avoid overtime pay.
In a climate where many are calling for an increased minimum wage, this looks like a step towards improving the compensation for a hard day’s work, though its final effect on the economy remains to be seen. Will it improve the middle class, or harm businesses? At this stage it is hard to tell.
Simplifying the Rules
One of the problems with the current system is that the rules are complex and may not reflect the spirit of the Fair Labor Standards Act. Simplifying these rules will allow both workers and businesses to have a stronger understanding of what is required and how the rules should be applied.
The new rules will raise the threshold of workers guaranteed overtime protection. Those who make up to $970 per week will now be eligible for overtime, up from the prior level of $455. Overtime and minimum wage protection will be extended in the first year. Those who would benefit include many women and college graduates who have not received protection thus far. Finally, the rules will provide a clear direction for who gets paid, and will defend against erosion in the future by implementing automatic updates in the future.
Take a look at our Ebook – Overtime Ruling – Update and Actions to understand how you can prepare.