On the Labor Department’s Final Overtime Rule

Washington, DC—The National Employment Law Project today hailed the U.S. Department of Labor’s issuance of a final rule updating the salary test that determines whether employers may deny overtime pay to certain executive, administrative and professional employees. The revised salary threshold governing the “white collar” overtime rules will restore vitality to the Fair Labor Standards Act’s guarantee of a 40-hour work-week, a protection that has steadily eroded since the late 1970s.

“Because the rules governing exemptions from the FLSA’s overtime law have not been meaningfully updated for more than four decades, far too many Americans have been working longer and longer hours for less and less money,” noted Christine Owens, executive director of NELP. “Current regulations give employers a major loophole for avoiding overtime pay, allowing them to classify workers earning as little as $23,440 as managers, though they have scant supervisory or managerial duties, and then require them to put in excessive hours, without any pay at all for their overtime hours. This scheme flies in the face of the dual intent of the overtime law, to curb abusively long work-weeks and to encourage employers to spread work to more employees instead of overworking a few. But overtime abuse happens with alarming frequency throughout the economy and especially in low-wage sectors such as fast food, retail and other service industries. The new rule will rectify the situation, raising wages and improve working conditions for an estimated 12.5 million lower-income and middle-class workers.”

Ford Foundation President Darren Walker also weighed in with support for the Department’s update of the rules. “The Labor Department’s new action on overtime pay is commendable and important. The rule will create greater financial stability for millions of Americans now working longer or unlimited overtime hours without compensation,” Walker said. “As a sector devoted to improving lives, philanthropy must play its part—ensuring that we enable the nonprofits we support to cover the true costs of operating their businesses, including fair compensation. We know nonprofits want to do the right thing and often make hard decisions to stretch limited resources as far as possible.”

Under the new regulations, which do not take effect until December 1, 2016—more than six months after publication of the final rules, and nearly a year-and-a-half after the rules were first proposed for public comment—any worker earning less than $47,476 a year will automatically be entitled to the overtime premium of time-and-a-half for all hours worked in excess of 40 per week. While still a far cry from the salary thresholds for overtime set in 1979, which covered 69 percent of the salaried workforce, this increased salary threshold will ensure that 33 percent of today’s salaried workforce will be guaranteed overtime pay, a significant and necessary increase from the mere 8 percent who are currently covered. This regulation will expand overtime protections to nearly five million more workers, and provide greater clarity and coverage to as many as 7.5 million more employees who currently may be entitled to overtime, but aren’t receiving it because of the weak salary threshold and large loopholes in the current regulations, according to estimates from the Economic Policy Institute.

Equally important, the Department of Labor will index the salary threshold and adjust it every three years, making sure that a stagnant wage level will never again be able to so dramatically erode the protections of the FLSA’s overtime law. In response to views expressed in the roughly 300,000 comments it received about the proposed rule, DOL decided to provide a six-month grace period for implementation, reduced the proposed salary threshold by approximately $3,000, pegged the level to the 40^th percentile wage among salaried workers in the lowest-wage region of the country, and elected to index the threshold to rise every three years instead of every year. DOL’s Wage and Hour Division intends to undertake an extensive program of outreach, education and compliance assistance for employers throughout the country. The modifications to the proposed rule and DOL’s planned assistance will greatly facilitate employer compliance with the new rule.

“The big business lobby and its allies in Congress will pull out every stop in trying to take away this long overdue raise for the middle class,” said NELP’s Owens, “but they face an uphill battle. Decades of neglect and inadequate revisions to the overtime rules has already yielded massive benefits for corporate America, at the expense of working people. The Labor Department has stepped up to address this inequity and imbalance with a rule that furthers the FLSA’s dual purposes, resurrects overtime pay guarantees for millions of white-collar employees, restores greater balance in workplaces and workers’ lives, and makes a dent in the gnawing inequality that destabilizes our economy and democracy overall. The rule is a win for workers who at long last will get the pay they have earned for the hours they work, for those whose hours will decline once they can no longer be required to donate their labor free of charge, for unemployed and under-employed individuals who will see greater work opportunities, and for local economies that will benefit from increased consumer spending resulting from higher wages and new jobs. The Labor Department’s update of the overtime salary threshold is the right thing to do, and NELP and its partners will stand with working people all across America to fight for full and final implementation of the revised overtime regulation.”

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