Is It Time for Employers to Start Preparing for New Overtime Rules?

The Department of Labor is expected to unveil its new overtime rules later this month.

For New York and New Jersey employers, it is never too soon to start preparing for the new overtime rules.

Existing Federal Overtime Laws

Under the Fair Labor Standards Act, employees must receive overtime pay for hours worked in excess of 40 in a workweek at a rate not less than time and one-half their regular rates of pay, unless they are specifically exempted. Where workers are subject to both the state and federal overtime laws, they are entitled to be paid in accordance with the standard that provides the higher rate of pay.

The most notable FLSA overtime exemption covers “executive, administrative and professional” employees and is often referred to as the “white collar” exemption. To qualify, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week ($23,660 annually).

For instance, in order to qualify for the administrative exemption, the employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers, including the exercise of discretion and independent judgment with respect to matters of significance.

Changes to the White Collar Exemption

Last year, President Barak Obama signed a Presidential Memorandum directing the Department of Labor to update the overtime regulations defining which white-collar workers are eligible to receive pay for hours worked over 40 in a workweek. In his directive, the President highlighted that the threshold has failed to keep pace with inflation, only being updated twice in the last 40 years. As a result, he argues that many lower-paid, salaried workers are not eligible for overtime wages.

The DOL’s proposed amendments to the FLSA’s overtime regulations are expected to significantly increase the salary threshold for overtime pay. Although the exact figure is not yet known, some are predicting it could be as high as $50,000. As more workers fall under the purview of the FLSA, employers should expect overtime suits to rise as well. It is, therefore, a good time for employers to review their policies and procedures.

The proposed rule is currently being reviewed with Office of Management and Budget for review. Once it is released to the public, we will post additional updates, so please stay tuned.