05/17/16

The Department of Labor Announces the Final Overtime Salary Threshold Rule

On Wednesday, March 17, 2016 the Department of Labor announced the new overtime exemption salary threshold.  For an employee to be exempt from the general overtime requirements the Fair Labor Standards Act requires the employee meet one of a number of different duties test by performing certain work duties and in most cases be paid a salary at or above a certain threshold. Currently the threshold is $455 a week which is $23,660 a year. The new salary threshold will be $913 a week, or $47,476 a year. In addition, the new rule also creates an automatic mechanism to update the salary threshold every three years, beginning January 1, 2020. Each update will raise the standard threshold to the 40th percentile of full-time salaried workers in the lowest-wage Census region, estimated to be $51,168 in 2020.

The rule will go into effect December 1, 2016.

I am very pleased with the new rule. Even though the Obama administration was shooting for around $50,400 and with inflation the new threshold would have to be around $51,000 to match the overtime salary threshold at its highest point in the 1970s, the final number is a huge gain.

The Department of Labor calculates 4.2 million workers will become newly eligible for overtime. The Economic Policy Institute put the number of newly eligible workers and workers who will be assisted by the new rule closer to 13 million.

The automatic update to the threshold is almost as important as the update to the amount itself. Before this change, the salary threshold had been last updated in 2004 and before that in the mid 1970s. The new rule will ensure the salary threshold doesn’t diminish via inattention and inflation.

Republicans and industry groups will attack the new rule with everything they have. The New York Times seems to think Republicans may have to reconsider their normal opposition to anything that might help working people.

“With Donald J. Trump as their presumptive presidential nominee, however, the issue is fraught with risk for Republicans. Any attempt to repeal the regulation could exacerbate an already palpable split between Mr. Trump’s blue-collar supporters and the party’s establishment donors and politicians.”

This different political dynamic might mean the rule can be implemented on schedule without serious legislative or judicial delays.

Please see the DOL’s fact sheet here.