President Obama Directs Labor Department to Modify Federal Overtime Rules

Posted in Business & Corporate, Employment

On March 13, President Obama directed the Labor Department and its secretary, Thomas E. Perez, to modify existing Federal Overtime Regulations under the Fair Labor Standards Act (“FLSA”).

Currently, workers are entitled to overtime pay of no less than time and a half (1.5 times the regular hourly rate of pay) for hours worked in excess of forty in a week, unless the worker falls within one or more of several exempt categories. Under existing law, an employee would be exempt from the overtime requirements of the FLSA if the employee is paid on a salary basis and in an amount of at least $455 per week, or $23,660 on an annual basis, and the employee’s duties are of an executive, administrative, or professional in nature or which involve outside sales – jobs termed “white-collar” by some. For example, lawyers and doctors compensated on a salary basis in excess of $23,660 per year are exempt from overtime pay requirements, and their employers can lawfully refuse to pay them overtime wages for hours worked in excess of forty hours in a week.

Although it is unclear as to what the regulatory changes will be, analysts believe that the Labor Department will seek to raise the wage threshold for exempt employees above the current $23,660 mark and tighten the requirement that exempt employees’ duties be executive, administrative, professional or sales-related in nature. They believe that this move is targeted at minimizing the practice by employers of classifying employees as “managers” due to limited supervisory, administrative or executive duties and for whom the majority of their job duties are indistinguishable from other non-exempt co-workers.

For example, an employer that hires an employee to be a manager of a retail operation, pays him or her in excess of $23,660 per year, and grants limited supervisory authority over hourly workers, but still requires the employee to perform stocking, cashiering, and other non-executive duties may require that the employee work in excess of forty hours per week, and refuse to pay the employee overtime wages for hours worked in excess of forty in a week. After the Rules changes, it is predicted that this practice will be curtailed, or that employers may have to hire additional employees to perform duties which are not executive or administrative in nature rather than requiring this work from salaried “white-collar” employees in addition to their executive and administrative duties.