The United States Department of Labor just released new rules for federal overtime pay regulations that should put more money in the pockets of millions of American workers.
The Department has raised the minimum salary threshold required to qualify for the Fair Labor Standards Act’s “executive” exemption to $47,476 per year. The rule will take effect on December 1, 2016. In total, the new rule is expected to extend overtime protections to 4.2 million more Americans who are currently not eligible for overtime under federal law, and it is expected to boost wages for workers by $12 billion over the next ten years, according to a fact sheet released by the Obama administration late Tuesday.
Previously, employees only had to be paid $455 per week, $23,660 per year, on a salary basis to be exempt from minimum wage and overtime requirements under the Fair Labor Standards Act. But the new rule raises that salary level to equal the 40th percentile of weekly earnings for full-time, salaried workers in the nation’s lowest income region, bringing the level to $913 per week, or $47,476 per year. That is more than double the current threshold for the overtime pay exemptions.
Even better for US workers, the salary threshold will automatically be updated every three years to ensure that it stays at the 40th percentile benchmark, according to the Obama administration. This means that our federal laws will keep pace with the changing marketplace and the rising cost of living.
What does this mean in the real world?
It means that starting on December 1, 2016, more people are eligible for overtime pay from their employers. Those employers are the ones that are required under the law to ensure that they are paying their employees the overtime pay that they are owed.
This new rule issued by the Department of Labor was especially important for America’s working population because the salary threshold had only been updated once since the 1970s–in 2004, when it was set too low. When left unchanged, the threshold is eroded by inflation every year. As a result, the previous threshold failed to help employers identify workers who were entitled to overtime pay, and it left millions without overtime protections to which they should be entitled.
The previous salary threshold, before this change, provided overtime protections to just seven (7) percent of full-time salaried workers based on their pay, compared with sixty-two (62) percent in 1975. The salary level that had been set in 2004 (23,660/year) meant that even workers earning less than the poverty line for a family of four earned too much to automatically qualify for overtime.
That’s why this rule change was so important. The rule will entitle most salaried workers earning less than $913 per week ($47,476 per year) to overtime pay. The update will provide a meaningful boost to workers, and will go a long way to ensuring that every worker is compensated fairly for their hard work.
If you think that you and your fellow employees are not being paid the overtime that you are owed, please contact the wage-and-hour attorneys are Locks Law Firm.